Gold, stocks, and trendlines

Gold is very strong. What does it mean for stocks?

The chart (click on the chart to enlarge it) shows the relative strength of gold relative to stocks.

A rising trend reflects a strong stock market relative to gold. A declining line says gold is stronger than stocks. The market is weak when gold is stronger than stocks.

I recognized a change in the trend on the graph. So I drew the red line. Yes, the relative strength broke on the downside a major trendline spanning 6 months. This is very important development that should not be ignored (see previous posts on this blog).

The break on the downside suggests gold is likely to remain strong relative to stocks for some time. This is bad news for stocks, according to this approach.

Of course, investors should check this conclusion against that of other indicators.

To find out more about my in depth view of the markets and my strategy just visit our website https://www.peterdag.com/ where you can review The Peter Dag Portfolio. You can also call me at 1-800-833-2782 to discuss your specific money management needs.

I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.

George Dagnino, PhD
Editor, since 1977