Wall Street Indicator suggest pull back imminent

Spot pricing for Gold $AU4178

Spot pricing for Silver $AU48.23

Spot pricing for Platinum $AU1495

A little known indicator is currently flashing red - and historically suggests a pull back in stock prices is on the cards.

Investors allocation in cash has dropped significantly, as more and more people are buying shares without any consideration of downside risk or being overly exposed to the sharemarkets. While we’ve previously talked to the RSI (relative strength index) as a method to see if the SP500 or ASX200 is overbought, this other lessor known indicator (known at the cash rule indicator) gives a very clear picture of exactly what investors are doing with their money. 

Currently the average cash allocation amongst investors is sitting at low of 4%. 

And investors are now sitting at high share allocations not seen since the early 2000’s. 

Currently investor confidence is almost euphoric, reaching levels not seen since the dot com investment period. Much of this euphoria is held around the introduction of AI based tools and LLM’s that are hopeful to increase productivity to levels never seen before.

Regardless of the reasoning for the euphoria felt towards the sharemarkets, historically when investors stop considering the downside risks and simply ‘go all in’, the outcomes are generally not pretty.

Gold and Silver are holding steady and continuing to consolidate just below both of their all time high’s (in AUD). 

Enjoy today’s charts. We’ll have Friday’s forecast and technical analysis coming your way, then we’ll be enjoying some time of for the festive season.

Gold daily chart, with 200MDA

Silver daily chart, with 200MDA

US500, with 200MDA

ASX200, with 200MDA