Stock markets around the world are either in full flight correction (Australia) beginning, or wobbling along. Yesterday we had the Asian stock markets, with the ASX200 down 1.88%, Japan (Nikkei 225) down 1.52%, Hong Kong (Hang Seng) over 2.11% and Singapore 1.83%.
This action was continued through to Europe, with the German DAX down 2%, UK FTSE 1.9%, French CAC40 2.1% and Italian MIB over 3.3%.
Lastly in the US falls were not on the same magnitude, with the DOW down just over 1%, the broader S&P500 1.2% and tech stock NASDAQ down 1.5%
What does all this mean? It is quite normal for markets to correct – they can’t go up 1% a day forever and need to reverse some of these gains before turning into a bubble.
What has been different in overnight markets is the nature of this sell off. Risk markets are normally highly correlated, which continues into currencies and bonds, and whenever risk is “on“, stocks and non-USD currencies and gold rise, almost in lock-step.
When risk is “off“, there is a flight of safety back to the USD and US Treasuries. Remember markets must equalise – there is no such thing as more buyers or sellers – they must mathematically be the same for anything to be traded. The influx of new money (via QE) subverts this equation, as does increased leverage through meta-money.
I’ve compiled some charts below that show where risk markets are at the moment, including commodities, currencies and stocks. These are daily/weekly charts that provide a technical look at trends complementing the fundamental macroeconomic view.
What’s interesting to me, particularly for Australian investors, is that gold (and silver) have been resilient to this broad selloff, and have not fallen with their other risk “comrades”, stabilising in value against the rising USD. Gold sold in AUD is rising in this case – $33 an ounce in the last 24 hours (I’ve used the Gold ETF traded on the ASX in the final chart below).
This sell off has all the hallmarks of an orderly correction – but it could turn into something much more. All markets – developed and emerging – are not experiencing benign bullish conditions, but are in a multitude of confusing sideways patterns. These are not investor’s markets.
Equity Markets
Currencies

The Euro has completed a Head and Shoulder pattern with target at 1.30 if the neckline breaks below 1.40
Bonds
Commodities

Disclosure: The article is not to be taken as investment advice and the views expressed are opinions only. Readers should seek advice from someone who claims to be qualified before considering allocating capital in any investment.
- Macro Afternoon - June 24, 2022
- Macro Morning - June 24, 2022
- Macro Afternoon - June 23, 2022
Top work Prince.
I 100% agree with your conclusion:
>This sell off has all the hallmarks of an orderly correction – but it could turn into something much more.
Thanks Avid – space doesn’t allow me to show the real correlation with November 2008 markets.
The lack of downside on Gold (USD) has me very interested, as does no upside in Treasuries.
As DFM said in the King Dollar comments, “The USD might surprise everyone and rally because other nations or groups are in a worse spot. ”
I would not be surprised at two rallies (or sideways) during a subsequent equity market correction: USD going up and gold staying stable or slightly rising (particularly against GBP and EUR – Adam Carr is right there – inflation is debasing their currencies more so than the USD QE debasement)
M2 shows why. In the USA it is rising at “normal” rates — i.e. at the same rate as we’ve seen for over a decade. M2 rising at similar rates in other regions. QE2 is an asset swap and not effecting M2.
http://www.wolframalpha.com/input/?i=US+money+aggregate
In other words the “debasement” is no different to what is occurring in other denominations.
I agree with DFM’s point about the USD.
I’d add that when the equity markets get shaky, everyone wants cash on their books, and cash still means USD. USDs are required to settle the majority of debts, in global terms. Those two factors are what lead to the flight to safety.
So there’s plenty of wind at the back of a USD rally in coming weeks.
hopefully this means my Australian gold stocks will actually start performing………
KCN is up over 3%, NCM up around 0.5%
I have a detailed watchlist of gold stocks, I might mention a few if they standout during my Trading Day report.
noticed that……i hold KCN, though am not a fan of NCM, i prefer exposure to smaller caps.
Pascoe’s anti Gold priced in AUDs rant from a few weeks ago looks to have been yet another in a long line of champion calls.
He has gotta be right up there as the most reliable trading indicator that I have ever seen.
I’ve updated my daily Trading Day post with a few gold stocks I’m following (KCN is one of them – and I do have a tiny holding in my super).
http://macrobusiness.com.au/2011/05/trading-day-the-correction-continues/
“These are not investor’s markets.”
Never a truer word spoken. Nice work with the post and charts.
Will be interesting to see how Gold/Silver hold up over the next several months if the general markets continue to correct (as I expect they will). News just out that Moody’s is reviewing UK banks with speculation they will be downgraded, could be the catalyst to send the FTSE to test that target you suggested.
Seems to be quite a few catalysts lined up that could send the world into another price destruction tailspin.
Time to be looking at ways to protect ones wealth IMHO.
Thanks BB – there are a few bargains out there for medium term investors, but not much at all for the long term/buy and hold.
Frustratingly for value investors, the focus may need to change to dividends only as the upside potential for listed shares is extremely low/nonexistent.
I’m watching gold closely – it has rebuffed the return to the USD – look at its twin AUD which briefly flirted with 1.04 today – this is a change…
Catalysts are the right word for sure.
Yeah, i have noticed the recent gold trends, too…interesting sideways movements, given the context (incl likely – and, as you show – actual movement cak to the USD).
I wouldn’t expect an uptick though (??) – more “price resilience” (aka sideways bullish?) than ouright appreciation vs USD at the moment?
Thoughts?
Even sideways for metals is a great result…
Interestingly, too, platinum didn’t fair as well as gold (slight correction) – symptom of weakening, or perceived future weakening, of industrial demand??
Thanks for the pictures. Looks a bit dangerous to me.