Posted: 10 Jul 2014 10:56 AM PDT

Normally a graph shows the price of gold or the S&P on the "y" axis and time on the "x" axis. But it is possible to plot monthly gold on the "x" axis against the S&P on the "y" axis. The result is a squiggly line connecting over 240 data points. In the graph below I see 5 zones or phases during the past 20 years – approximately defined as:

SP vs Gold 1994 2014 price

Zone 1: Jan 1994 – June 2003. The S&P booms and busts and gold prices change very little.

Zone 2: July 2003 – December 2007. The "shock and awe" phase sends both the S&P and gold much higher.

Zone 3: Jan 2008 – December 2009: The "crash" phase sends the S&P down and gold prices are erratic.

Zone 4: Jan 2010 – December 2011: The "gold rally" phase sends gold up substantially while the S&P rises somewhat.

Zone 5: January 2012 – Present: The "paper era" where paper gold comes down hard and the paper S&P is boosted to all-time highs.

I think both the gold market and the S&P are at or near the end of their recent trends, so we should expect change:

a) The S&P is at all-time highs, has been rising for 5+ years, and is over-extended by many measures. Sentiment is overly positive. It appears ready to fall or move sideways for some time. "Financial TV" will be disappointed.

b) Gold dropped nearly 40% into its December 2013 low and is finally moving higher. Sentiment is still negative, but gold appears ready to rally. Gold "bears" and the bond market will be disappointed.

c) We can assume the Fed wants the S&P to continue rising and gold to remain stable or drop lower. However, I think those trends are reversing. The Fed will be disappointed.

I have added an arrow indicating what I think the next phase of price movement is: gold up and the S&P flat to down.

SP vs Gold 2 1994 2014 price

Time will tell.

In the meantime, read:
Stocks Heading For a Crash
The Entire US Gold Hoard Is Now Gone!
Gold Prices Benefit From Economic Sins
Cusp of a Nuclear Meltdown

GE Christenson | The Deviant Investor

An update on Gold charts -- has the bull been injured? PeterLBrandt ...

Posted: 15 Jul 2014 06:17 AM PDT

Posted by PeterLBrandt
on July 15th, 2014

Gold experienced a sharp break on Monday. In the process it stopped me out of some long futures positions. Yet, the longer-term charts remain potentially quite constructive.

My view of Gold is that the daily closing price graph is forming an inverted H&S bottom of significant magnitude. A decisive close above 1390 is required to complete this bottom pattern. My opinion is that if this H&S bottom is completed, the dominant bull trend in Gold that originated at the 2001 low will resume and a new all-time high is a matter of time.

Near term, Gold has some technical problems that must be resolved. Monday's decline did some damage to the market internals. The market is overbought on a daily basis (although not nearly as overbought as it was in August 2013 or March 2014) and the momentum indicators show some weakness. The lines in the sand to the downside are 1277 and 1240. Gold must hold these lower levels to remain healthy. There is always the potential that Gold will regain its footings on a more immediate basis and continue higher toward a major pattern completion.

$GLD, $GC_F

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.