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Hot Money Sector Rotation Hits Gold: Dave's Daily

Stocks in this article: MET XLF C KBE GLD

Gold started selling off the previous week after the Fed planted a QE story at the Wall Street Journal on Wednesday. With only a limited bounce thereafter the selling has been consistent. Why? Hot money is leaving gold markets and moving to stocks. It doesn't help gold that the dollar is also rising returning both to their normal inverse relationship. The dollar hasn't rallied dramatically but enough to chase gold bulls. Momentum for U.S. stocks is strong even with a smaller than usual number of players as volume remains historically light.

A stronger dollar isn't helpful to commodity markets generally which also negatively affects exporters, industrial (XLI) and materials (XLB) sectors. Apple (AAPL) continues to lead the tech sector (XLK) higher. Perhaps more encouraging is the ongoing strength in financials (XLF) and banks (KBE & KRE) despite larger losses in Citigroup (C) and MetLife (MET) after failing stress tests.

Stocks Wednesday were choppy and in consolidation mode after Tuesday's large rally. Economic data was scant overall and let's not forget, we're approaching quadwitching Friday.

Volume remained on the light side once again and breadth per the WSJ was negative overall.

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IWM - The iShares Russell 2000 Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the small capitalization sector of the U.S. equity market as represented by the Russell 2000 Index. The index represents the approximately 2,000 smallest companies in the Russell 3000 Index.
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QQQ - PowerShares Capital Management LLC is passionate about our goal of delivering the highest quality investment management available through one of the more benefit-rich investment vehicles ever created, the exchange-traded fund.PowerShares QQQ¿, formerly known as "QQQ" or the "NASDAQ- 100 Index Tracking Stock®", is an exchange-traded fund based on the Nasdaq-100 Index®. The Fund will, under most circumstances, consists of all of stocks in the Index. The Index includes 100 of the largest domestic and international nonfinancial companies listed on the Nasdaq Stock Market based on market capitalization. The portfolio is rebalanced quarterly and reconstituted annually.
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