Gold / Oil Ratio Near a Multi-Decade Low

It could mean oil is about to correct. Also, these are the levels that triggered a 1 year double or so in the XAU beginning in fall of 2000 and summer of 2005. I should add the the XOI / CL ratio is right at multi decade lows right now. It obviously means stock market players thing CL is going lower--or else some of the oil shares are perhaps undervalued versus the oil price.

Edited by Cirrus, 07 May 2008 - 03:17 PM.

Last time the Oil and Gas Producers diverged from the price of oil you know what happened. The only way to take the spx down is to take down the Big oil names. Is that in the deck of cards tomorrow? It might be, I know I will be watching closely. It certainly seemed like distribution this morning. Anyone got anything to suggest that?

The problem is that the oil companies are selling at multidecade low ratios verse the price of oil already with oil where it is. I mentioned earlier CVX has a 3% divy, sells for 7 to 9 times forward earnings, has a net of $2B in cash on the balance sheet and is generating about 15+% of its market cap in cash each year at 100 or so dollar oil. These companies costs are paid for so a 10$ move in oil goes straight to the bottom line. The market has priced in much lower energy prices already, IMO.