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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

The Charts Say It’s Time For Gold To Pullback

Commodities / Gold and Silver 2010 Nov 07, 2010 - 06:48 AM GMT

By: David_Grandey

Commodities

Best Financial Markets Analysis ArticleBelow are the charts of GLD and the USD and their correlation says to expect a pullback to at least relieve the overbought nature in the indexes and gold as well.


As one might expect GLD up, dollar down until? Until you start getting some trend channel tags (trend channel support or resistance) and RSI Divergences (Positive and Negative). And that my friends is exactly what is showing presently.

With the USD please make note of the RSI Positive divergence. What this shows is that while the USD itself made a new low as shown on Thursday the RSI DID NOT CONFIRM those lows. That is a positive for the USD and of course a negative for GLD and the indexes here.

But you all already knew GLD is looking tired here right? Why? GLD is at trend channel resistance. And just the opposite in the world of RSI divergences, in this case new highs on negative divergence. Now that’s correlation folks!

This all goes hand in hand with what the indexes are saying because the correlation has been dollar down, market up. If the dollar is sporting positive divergence and has what could be 3 waves down showing then it stands to reason that the indexes and GLD would be showing just the opposite (that 180 degrees correlation thing) and that is exactly what it is showing.

This too is another piece in the puzzle that points to a much needed pullback in the indexes, GLD and the follow the leaders stocks to relieve the much needed extreme overbought status.

Or you can look at it this way. If you were not in GLD would you be interested in buying it knowing what you now know about trend channels? What about the USD can you honestly say your interested in shorting it here? Both say doing so is being late to the party which is always the case AFTER each has already made moves.

By David Grandey

www.allabouttrends.net

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David Grandey is the founder of All About Trends, an email newsletter service revealing stocks in ideal set-ups offering potential significant short-term gains. A successful canslim-based stock market investor for the past 10 years, he has worked for Meriwest Credit Union Silicon Valley Bank, helping to establish brand awareness and credibility through feature editorial coverage in leading national and local news media.

© 2010 Copyright  David Grandey- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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