With earnings season upon us and really kicking into high gear next week, I am keeping a close eye on gold for signs of possible risk aversion trades. As I discussed here (http://investorplace.com/2013/04/go-for-the-gold-but-do-it-quickly/) on April 2nd, the near-term inverse correlation between stocks and gold, upon a sell-off in stocks, is consistent. In other words, a quick 1-3% correction in stocks often leads to a pop in gold, while the longer-term correlations between the two asset classes are much more random.
The longer term chart of gold, as measured by the SPDR Gold (GLD), remains much the same, with major support hanging around the $148 – $149 area. Through this lens also note the series of lower highs off the September 2011 top. What ultimately is needed, and in my humble opinion will occur, is a lower low by breaking below the $148 – $149 support area, to turn the chart of gold lower.
In the meantime however a trade to the long-side via the SPDR Gold (GLD) looks to be setting up. The daily chart below shows the etf had a nice gap and go higher on Friday April 5th on the back of the weak March jobs report. Yesterday however, despite the strength in stocks, the SPDR Gold (GLD) continued to move higher and right into a first down-trend resistance line. Could some money be taking a little cautionary posture ahead of the earnings avalanche that kicks into full gear next week? Momentum too looks to have plenty of room higher if we look at the Stochastics. A break above $154.50 on the SPDR Gold (GLD) now looks interesting for a long-side try.