Wednesday, September 17, 2014

Various asset class prices in oil barrels and What do they reveal...

-"Oil makes the world go round"?
-Oil is the most valuable commodity for the entire economic activity worldwide.In the following charts we can see the price of various asset classes in oil barrels.Oil exporters are producing wealth with which they can buy different asset classes like precious and basic metals, equities or bonds.Let us now see in terms of oil barrels which of these assets are now expensive and which of them are cheap

A)Gold

Gold is currently expensive.Not a buy.
B)Platinum
Platinum is fairly priced.Not a buy.
C)Palladium

Palladium is expensive.Maybe a sell
Basic metals
D)Copper
Copper is relatively expensive.Not a buy.
Equities
E)SP-500
Equities are fairly priced.Still not expensive but near a resistance line(middle horizontal line) and maybe that's why near a correction.
F)30 year Bond price
Bonds are still cheap and in a downtrend.However bonds might be ready to break the descending trendline from 1999 and start an uptrend.That would be another buy signal for bonds.

Let us now see what it would have happened if we had traded these assets when they were cheap(buy) or expensive(sell) in terms of oil barrels. 
Gold
Platinum
Palladium
Copper
SP-500
Bonds
Not bad at all!We can see that in many cases buying or selling various asset classes based on their historical oversold or overbought condition in terms of oil barrels  is an interesting although relatively long-term market timing strategy.
We can also see that the only two asset classes that are currently on a buy signal are SPX and Bonds(bonds last buy signal in 2005, and SPX last buy signal in late 2011).