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Intermarket Analysis

Jan. 30, 2011 4:44 PM ETGLD, USO, OIL-OLD, AGG, UUP
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Looking at Gold, we see that a Three Mountain (triple top) candlestick pattern has formed with a Dark Cloud Cover, Dark Cloud Cover, and Island Reversal Bar. These three tops formed over the general consolidation area showed by the ascending triangle drawn with the white trend lines. Also of note was that each top was formed on consecutive lower volume tests of the high. This weakness was finally confirmed when $GLD gaped lower under the lower trend line. The breakdown gap confirmed the weakness and started the down trend in $GLD. From the size of the distribution pattern I believe this trend will continue for some time before a possible reversal to a uptrend occurs. Other commodities seem to be faring better, such as oil.


Oil is holding it's uptrend with strong volume off its trend line. While volatile, it is making new highs. The previous months may be a larger price consolidation paving the way for higher prices in oil. Time will tell, but the recent strength in energy stocks that we have seen in our daily sector review leads me to expect more upside in oil.


Bonds also had a triple top that looks to currently be in a bear flag with an ascending bottom. The previous, smaller bear flag was broken down in with a gap, igniting the down trend that bonds are in. I am expecting weakness to continue in bonds in general with a breakdown in the current consolidation.


The dollar is in an obvious down trend currently. There was a lot of volume in the last major bottom, which may signal the eventual bottom. If $UUP makes new highs after not making new lows, it would confirm a change in trend. We will have to watch how the dollar acts around it previous bottom. Look at the economics of the Fed and US treasury as of late, I will be biased towards the dollar continuing its de-valuation. With a weak dollar, Gold currently weak, the bonds initiating a down trend and the market far extended, it looks as if inflation is coming creeping in lightening up the bullish participants. In Market Summary, the assets will all be posted side by side for easy comparison. Use it to find where to put your assets.

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