When reading through the TraderPlanet articles this morning, I came across David Moenning’s article (Modest At Best?). One section of the article particularly caught my eye. If you have been reading this column for a while, you probably know the line in the excerpt below that I found most appealing.
Stocks have been moving up lately on the back of what appears to be a general improvement (albeit modest) in the data. Just a short time ago (June to be exact), the perception was that the economy was heading toward a cliff, Thelma and Louise-style. But then, starting in Europe of all places, we started to see some reports coming in above expectations.
If you thought the second sentence, then you are correct (did you get my hint?). Those who have been reading this column should know by now that I rail against the pessimistic lens applied to the news du jour – the glass is not only half empty but whatever water is left in the glass is evaporating fast. This reality is a sorry state of affairs, but it is reality, and I don’t see this changing anytime soon. Bad news sells, true, but really bad news sells more. In any case, Moenning’s article is a quick but good read with a solid appraisal of the current state of the market. On another note, I received the question below, and it stimulated my thinking …
Can you show the relation between gold, crude oil, the U.S. dollar, the yen, the euro, and the Australian dollar?
How can I show the relationship between these markets? Hmmm … I thought about creating some type of chart but dismissed that as too complex. Then I thought about explaining the relationships but realized that I only have so much space. Then it hit me. All I need is a good analogy to explain it. Okay, so I had to come up with a good analogy, but what? What simple mental picture could explain such complex relationships? Then it hit me …
Picture light streaming through a narrow window in the late afternoon. Look closely at the specks of dust floating in the air. Can you see the dust particles lightly drifting around each other? Now lightly apply pressure with a puff of air. See how they move about a bit faster. Some go up, some go down, and some simply move sideways. Hmmm … Not so good I think. How about this?
The relationship between these markets is like a solar system. In the middle is a big star. Circling about that star are a number of planets. As each revolves around the star in its particular orbit, it is either moving closer to another planet or it is moving further away. As it draws closer to another planet, gravity pulls on it causing it to bulge. As it moves away, the affect of gravity lessens causing the planet to flatten. Hmmm … Better, but not complete.
Well, to answer your question, I guess I can’t really show the relationship between these markets. Take my word for it, though, as each moves, it affects the others, either pulling money in, away from the others, or pushing money out, toward the others.
Trade in the day; invest in your life …
