Did Gold just place a warning question mark sign to stock bulls?

Gold is heading higher?

 

During the recent rally of the stock markets to new highs and a swing to the upside range barrier for the USD (DXY) one important asset held its recent gains and bounced from every downside swing. You can guess it was the Gold. The support zone between 1470 and 1490 was on defense and along with reaching new highs last week for the SPX, we had a Gold rally from 1485 to 1516. It is a clear warning sign for stock market bulls clearly.

 

On the comparison chart of the SPX (pink candles) and Gold (normal candles), you can see that for the previous three SPX downside corrections (in the rectangle) the exact same weekly bullish candle preceded. The connection is obvious and the only question for the next trading week will this play out?

Watching the SPX Daily chart alone in the previous two years, this is more and more a high probability setup. Extreme narrow wedges within a large broadening wedge (bearish structure), persistent RSI divergence and much lower volume are all calling for a correction, which will then give our noticed GOLD and SPX correlation a boost. That will give Gold another impulse for heading into 1600.

 

We have used the combination of the top-down trading analysis to get these key levels explained in the charts.

Happy trading! (click on the chart to enlarge it)

 

Try our Managed accounts