This week gold and the HUI had their "it's showtime!" moments by [bullishly] rising above the necklines of their bearish topping formations. Now the same thing is in store for Mr. Dow in his relationship to gold. It's showtime except that for Dow it is the opposite scenario. The daily Dow-Gold chart simply cannot drop any further without invalidating the short term bullish inverted head & shoulders scenario and its attendant target in the 16.5 to 17 range. Now, with skying oil and AIG's none too subtle hint that the credit crisis is far from over it sounds silly, but the Dow is not broken in its attempt to lure in the hopeful.
Here is a weekly chart of the Dow showing two things I find interesting:
1) There still looks to be upside - believe it or not - to stocks in nominal terms looking at the crosses in MACD & TRIXY and the upside could surprise some people. So much so that we could get all kinds of nouveau contrarians buying a bullish wall of worry story.
2) But in looking at the last bear market, weekly MACD & TRIX argue loudly that the wall (or better yet, ceiling) will be made of iron reinforced concrete. This is a bear market.
A scenario that would resume the climb of stocks vs. gold? Oil would need to top out very soon and reverse. Holders of gold who think high oil is causing inflation would begin to sell and stocks would get a dose of feelgooditis AKA hope. But as usual, we let the markets tell us what will happen. All I can do is illustrate that in the short term things must reverse soon or else it is back to bear market central sooner rather than later.
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