NEW YORK ( TheStreet) -- The week leading up to Friday's nonfarm payrolls report was expected to be volatile; it has yet to dissapoint. Monday saw a weaker-than-expected Institute for Supply Management manufacturing reading, which pushed the U.S. dollar lower and stocks higher. The premise was that the weaker data would keep the Fed in the easing game longer. With markets acting even more irrational than ever, it takes a lot of intermarket analysis to make sense of it all.The first pair under scrutiny is S&P Equal Weight ETF ( RSP) over SPDR Gold Trust ( GLD). The pair measures U.S. equity over gold, a notorious risk and inflation hedge. Equities have pushed higher on a nominal front, but have fallen relative to gold. Since inflation is not a concern, as seen in my article on Monday ( Global Macro: The Importance of This Week's Employment Data), gold must be catching a bid from risk-averse investors.
The pair shot higher at the end of 2012, a testament to the lack of concern about volatility. This period also saw a fall in the VIX, an options volatility measure. This pair should continue to push lower leading into Friday, and break strongly lower if the market doesnt't like what it sees.