Gold got a nice lift off after a widely expected rate hike, but it’s been flat to down as markets have been trading very strangely against each other. We’ve seen continued high levels of volatility, but those haven’t translated to real risk aversion on the part of equity traders.

Add the politics, namely a trade skirmish between the US and China that could still potentially become a trade war, and we have a market that probably should be more concerned than it seems to be. Traders are not taking the US president seriously, or at least are assuming cooler heads in the White House will prevail. I’m not sure that’s realistic anymore as the list of cooler heads at 1600 Pennsylvania Ave seems to be getting shorter and shorter.Tensions with China have also hurt base metals, though the percentage losses are not large yet and I don’t think the real impact is that large. China is still importing a lot of base metals and most of those go into local demand like infrastructure, not into things that get re-exported.

Gold explorers and developers still look relatively weak though a couple of the developers on the HRA list, updated inside, continue to outperform.  Like the last issue, the Strong Buys are reserved for a couple of zinc developers, both of which I expect to perform well over the next month or two for their own reasons.

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We’re now two months, more or less, into a major market correction. Its not a particularly nasty one, at least so far, with the biggest drawdown being 10% on the SPX from its late January high.

Still, it’s a distinct change in the overall tone of the markets. I think traders, across all markets, are still getting used to that idea. When we get these sorts of shifts, we’ll often see changing correlations between markets. Actions and reactions between asset classes change, which just makes seeing the way ahead that much trickier.

To use the most obvious example of changed markets, look at the 15-year VIX chart below. VIX is viewed as a good analogue for “risk”. Strictly speaking, changes in the VIX reading don’t -necessarily— imply anything about the direction of future price changes. Even so, I think most would agree that since most traders are fundamentally bullish, rapid increases in VIX are more likely to foreshadow down moves than up. Markets don’t really like indecision.