What's The Gold Doing?

The gold market has been muted for the most part in this latest round of stock market weakness driven by pending banking crisis developing in Greece and Spain....until today. Interestingly, the historical inverse correlation that emerged in 2011 between gold assets and the broad US stock market has not really shown itself so far in this latest correction of what is emerging as a deflationary flight to safety episode.

Lets have a closer top-down structural look at the gold complex.



From the line chart below we find the overlays of GoldCorp (GG--NYSE 'Blue'), Gold Futures ('Black') and S&P500 mini futures ('Green') since Feb 2011 at the level of the day time frame.

We can see that from above the GG (blue) and GC futures (black) lines rally as the ES futures (S&P500 Green) collapse during the August 2011 market shock in response to macro-euro risk. This implies the early perception of gold assets as safety in times of political fiscal mismanagement and uncertainty. Following last August market correction we see declining gold assets with subsequent reflation in the broad stock market S&P500 into March 2012 in line with coordinated global central bank swap line liquidity intervention establishing a perception of stability. And since the correction in March 2012, which began as an early risk off pullback from an overbought stock market evolving into systemic risk-off flight to safety in the recent 2 weeks has seen gold remain very neutral in its corrective pattern....until today. Could this be another push higher in gold assets implying caution to stock investors from the long side.


We can observe the long term downtrend in GG via the day chart view below with a momentum Long buy signal generated May 17, 2012.

Using the day chart above as a reference providing context we can drill in deeper to the intraday  activity of GG and observe the short term momentum buy signal May 17 indicated by the 'green' arrow below and the LE - 34.61 (Long Entry) reference.

We can see on May 17, GG traded up and through the 3 day regression pivot overlay, with expanding ATR and volume to indicate a short term change in bias to the upside with a closing on that day > weekly channel low support level (blue horizontal line). This implies urgent buying in GG from larger funds and important structural change back above the weekly channel low and through the short term regression to imply change in bias.  On May 29, we saw GG pull back into lower weekly support (blue horizontal line) and rebound on excess buying the following day. I stay long through this pull back. Today we can see GG breaking above important monthly resistance (brown horizontal line).


We can also use the macro weekly chart below to examine longer term trend channels and regression along with Fib retracements to 2009 lows. We can see from below that the long-term macro-weekly channel low has been formed coinciding with a 50% retracement of the entire 2009-2012 up move.

Lastly, we can observe the Gold futures coming back into monthly support at 1523 for the 3rd time and stabilzing prior to todays rally.

We can look closer at the gold futures by examining the important Long signal generated LE-1566 May 30 coming off the important weekly low at 1532 coinciding with the monthly low at 1526. This LE is the system generated long entry signal as the gold moved back above the 3 day regression, implying short term change in bias which positioned me ahead of today's big price moved.