Gold, Stocks Rally but Pullback Looks Likely

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A lot has happened this week on a technical analysis basis so let’s check some charts.

SPY 30 Minute Intraday Chart

This chart shows the volume traded at various price levels for the SPDR S&P 500 ETF (NYSE: SPY). These high volume levels act as support or resistance depending if you are above or below them. On Wednesday we had large gap higher into a resistance level which the market could not break through. So I am expecting to see the market take a pause and fade back down to fill all or part of Wednesday’s gap window.

I expect a couple days of sideways to lower price action. Buyers should step back in and send the market higher next week if this trend is to continue.

SPDR S&P 500 (NYSE: SPY) 30 minute chart

Market Vectors Gold Miners ETF (NYSE: GDX)
Gold stocks have been underperforming the price of gold bullion for several months. This typically is not a strong sign for physical gold prices. That being said I do feel the majority of investors are seeking true safety and want to own real gold and not some highly leveraged gold stock.

From the recent price action shown on the GDX chart I am expecting to see prices trade sideways or lower in the coming days. A sideways move would actually be bullish and would signal a possible breakout to upside. So that is what I am hoping will unfold in the coming days/weeks.

Market Vectors Gold Miners ETF (NYSE: GDX)

US Dollar Daily Chart
The dollar continues to get sold at a tremendous rate and the Fed is devaluing the currency as quickly as it can as it tries to save the world one dollar at a time. The trend is strongly down but we are near a point where we should keep an eye on signs of a reversal to the upside. When the dollar makes a move higher and starts a rally it will put downward pressure on stocks and commodities. We must be prepared to move our protective stops up and possibly take advantage of falling prices in the near future. Until then remain long equities and commodities.

US Dollar Index

Conclusion
In short, it looks as though stocks and commodities are in favor again. Monday’s panic sell off looks to have shaken the masses out of the market and the big money players were buying up all the shares they could. Members and I are sitting nicely in our long positions and this could be the start of something exciting.

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Article printed from InvestorPlace Media, https://investorplace.com/2011/04/gold-stocks-rally-but-pullback-looks-likely-spy-gdx/.

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