Updating Syria Risk-On Intermarket Money Flow for August 27

Aug 27, 2013: 3:01 PM CST

It doesn’t take long for the cross-market landscape to react to a major news event, and that’s certainly what happened over the last few hours.

Let’s take a quick end-of-day overview to assess what’s happened and where money’s flowing in the aftermath of escalating Middle East tension.

We’ll start with the pure futures chart overview:

Intermarket Analysis Landscape Cross-Market Futures Money Flow on Syria News Tension

A quick summary – along with logic – tells us that “scared” or “Risk-Off” money tends to flow OUT OF equities and INTO the safety of US Treasuries, but the geopolitical tension also helped propel money flow quickly into Crude Oil and metals such as Gold and Silver.

Traditionally, Stocks and Crude Oil trade together (positive correlation) while stocks have shown a negative correlation with US Treasuries/Bonds (inverse correlation).

I was careful to highlight a subtle shift – that is not so subtle now – in my prior August 20th post: “An August Bend in the Intermarket Landscape.”  Be sure to check that out for some background and “early warning signs” that something was amiss in the intermarket landscape ahead of today’s major course-correction.

We’re seeing at least a short-term shift toward positive correlation with Stocks and Treasuries/Bonds and a negative correlation with Stocks and Oil.

To be specific, we can see from the ETF-based comparison below of the “Risk-On” money flow taking place as funds shift to account for escalating tension in the Middle East:

Intermarket Analysis ETF Exchange Traded Funds GLD USO SPY UUP SLV

The ETF Money Flow comparison chart above shows the SP500 (SPY), US Oil Fund (USO), Gold and Silver (GLD and SLV), US Treasuries/Bond Fund (TLT), and the US Dollar Bullish fund (UUP).

In sum, money flooded into all markets except Stocks and the US Dollar Index (which is roughly unchanged – we’ll leave it out of the focus).

Money shifted quickly out of US Equities and into broader global markets such as Oil, Gold, Silver, and the relative safety of US Treasuries.

Gold broke – and closed – above its key $1,400 per ounce level and the SP500 traded down from its 1,670 key resistance target as I highlighted in yesterday’s “Planning the Daily and Weekly Chart for SP500” (a good reference with today’s new information).

Continue monitoring these ‘bends’ in the intermarket landscape or money flow environment along with the “Risk-On” premium unique to the geopolitical situation as it develops.

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Corey Rosenbloom, CMT
Afraid to Trade.com

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