It seems this morning … everyone is taking it on the chin to a certain extent. Bonds. Stocks. Currencies are a mess that I don’t even want close to at the moment. Commodities. Everyone is getting beat up.
There’s a lesson there.
When stocks are getting beat up? When Commodities are getting beat up? When everyone everywhere is selling a bit lower?
Take note of who is getting beat on, who is selling off … more than other sectors …
At the same time?
Take note of who is down, but not getting beat on as badly as other sectors …
This is the concept of relative strength.
If every asset is selling off? Then when you compare them all together, who is standing taller than the rest in this general overall smack-down? You’ve just found a sector that is a bit stronger than others. You have found some relative strength. So if you are looking to buy weakness (I’m not this morning, but we’re just saying this for the sake of example), then you buy the strongest player among it’s peers.
A is selling off 10 points
B is selling off 9 points
C is selling off 6 points.
Ok, then if you are looking to buy weakness, obviously you would want asset C.
The converse is true as well. If everyone is getting beat on? Who is going down, and going down harder than everyone else?
You’ve found your weak relative player.
And this morning, getting raked over the coals is Gold and Silver.
Who knows and who cares. The market is telling us that Gold and Silver are the weakest players in the bunch.
Sorta sucks too. I was hoping they would not have fallen apart so quickly so I could short them, but that train seems to have left the station without me.