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Market Roundup - 22nd May 2012
When establishing a vineyard, the grower will plant a rose bush at the end of every row of vines. The reason being is that rose bushes are susceptible to the same diseases as the vine providing an early, and very visible, warning to the grower that all is not well
In the same way as the rose is the sentinal to the vine, divergence is the sentinel to the market.
We can see divergences everywhere at the moment. The S&P500 index has been pushing higher without the participation of the European indices nor the trading volume required to confirm a genuine bull run.
For some time, the Gold Bugs Index, representing unhedged gold mining stocks, has been diverging from the gold spot price. As the vine to the rose, the gold spot price has not only finally turned south but has broken below its long term rising trendline.
But isn't gold the ultimate safe haven from the raging hyperinflation that will be ravaging us any day now?
Kevin Barry of the Traders & Investors Club explains why he thinks that we will be seeing neither hyperinflation nor a booming gold price anytime soon.