What fear looks like…

Folks watching the dow today got a unpleasant shock. Dow dropped 10% only to regain some ground reducing the loss. Odds are automatic trading went into effect after some ‘technical limits’ got hit. Now, this was somewhat predictable… Here is the last 3 days of gold compared to the Dow…

On Tuesday, gold and the Dow were pretty much synced up, as gold has been for the 12 months. (Which is another problem.) You can see the divergence of this on Wednesday. This divergence is a good predictor in that today would have been easy to guess would most likely be a negative day. (Though no clue it would be as bad as it was, of course.)

I highly recommend to folks to compare dow index to gold for today around 2:30pm EST. Its pretty interesting and shows the impact of automated trading systems.

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