Courtesy of David Grandey
Below 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.
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