Gold:Dow ratio
Above chart witnessing a relative comparison chart between Gold and Dow Jones Industrial index. As seen, after a steep sell off since so many months, finally price and Momentum indicator has given some positive signs. Ratio pierced its 50 and 200 d SMA and finding its support near that levels. But what is more intresting is , below RSI . RSI went into an Mega overbought region, this shows Gold to outperform DJIA in the coming months.
Gold stocks( HUI): Gold ratio
This chart covers nearly 16 months of gold and gold-stock price history, a long secular span that witnessed virtually every kind of market condition imaginable. This ranged from mighty gold-stock bulls to a once-in-a-century general-stock-market panic. And throughout all of that, good times and bad alike, the gold stocks were always priced much higher relative to the metal that drives their profits and hence ultimately stock prices. For the better picture we added correlation line under the ratio which depicts more then 90% positive correlation. Again a leading indicator for the Gold price.
Dow industrial vs Dow transportation
For the further clarity we added DJIA and DJTA. As per the Dow theory “Averages must be confirm”. Above in red line ( DJTA ) is still struggling to cross its intermediate highs of 8215 levels whereas on the other side DJIA ( in blue line) has crossed and trading above its intermediate high. This indicates a divergence. This doesn’t mean an absolute sell for the DJIA . But looking at the past history, DJTA is considered as the leading sign.
Hence above analysis is indicating a positive sign for the Gold price in the coming sessions and minor sell off in the equity market.