Since the post before this was about the Intermarket Relationships, it only makes sense that we examine what the two most important markets are doing. Lets us first examine the USD Index.
The chart (daily) below shows that the Dollar Index has broken a key a support or lets presume its testing it thoroughly (marked in blue horizontal line)! It retested the resistance posed by the 200 periods MA and then drifted lower. There is a 20/200 bearish crossover and prices have made their way down below both the averages. Looking at the indicators below, one does get an indication that now USD might try and consolidate here to either bring down the MA’s or give a lil bounce up to catch up with em (same old principle I oft repeat in this blog “Reversion to the Mean”)!
If we take a look at the Gold chart below we find that the Daily (on the right) has reached its channel resistance and also neckline resistance (marked in dashed red line) of the almost defunct H&S. In this case also the price is way above its nearest MA’s the 20 and the 50 so a pull back (correction) or sideways consolidation is the need of the hour! The weekly chart on the right is what shows a very optimist (for the gold diggers) and a scary (for the stock guys) picture. Gold is on the verge of making an inverse H&S on the weekly! Hold your horses I JUST SAID “ON THE VERGE” only. This gets confirmed only and only if we have a decisive break above $1000 (and boy this aint easy)!
So where does this leave you? Well speaking of myself it leaves me confused and also intrigued coz the USD is at important support and Gold at important resistance. Both will either break them or just bounce back from their respective support and resistance. A lesson in Technical Analysis and Intermarket Relationship.
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