10 Things the Relationship Between the S&P 500 & Gold is Telling

The last few days have seen a 100% negative correlation between Gold ($GC_F) and the S&P 500 SPDR ($SPY). Looking at the ratio chart of Gold against $SPY below there are at least 10 reasons to believe that the markets are in for more of the same in the short run, with a target of a ratio at at last 14.32 to come. This relationship does not have to hold up and could change, but the evidence for continuation is accumulating.

1. The ratio is moving lower with big red candles on large volume.

2. It closed on the low.

3. The Relative Strength Index (RSI) is heading steeply lower and is still above the mid line.

4. The Moving Average Convergence Divergence (MACD) indicator is about to cross negative.

5. It has passed the 23.6% Fibonacci retracement of the move up but has much room to the 38.2% level and the expected retracement to either 50% or 61.8%.

6. It has a bunch of room lower to the Fibonacci Fan support where it is crossing the 38.2% Fibonacci retracement level.

7. After breaking the channel between 10,30 and 12.30 it exceeded the target of 14.30.

8. The Bollinger bands are tightening as it falls.

9. It still has room to the middle of the Bollinger bands at 14.61 and an overshoot is very common.

10. Support from the last pullback occurred at the 14.32 Fibonacci level.

As always you can see details of individual charts and more on my StockTwits feed and on chartly.)

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