Gold Stocks (and Gold) vs the Stock Markets..Caution.. Open Mind Required

By: Rambus Chartology | Wed, Feb 13, 2013
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I like to use this chart when I want to know how the HUI is doing compared the the stock markets. It clearly shows that sometimes the HUI is outperforming the SPX in a big way and sometimes the SPX is outperforming the HUI, yellow shaded areas, and sometimes they move together. I would like to focus your attention to the right side of the chart that shows the blue shaded area. The blue shaded area shows how the HUI and the SPX has decoupled starting in November of 2012. How long this divergence goes on is anybodies guess. But it is what it is until it changes.

$HUI Gold Bugs Index - AMEX INDX
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Lets look at a couple of ratio chart that shows something may be brewing when we compare gold to the COMPQ or the SPX. First lets look at the Gold to COMPQ ratio that is showing that the COMPQ has been outperforming gold for over a year now. There is a potential unbalanced double top in place where the double top trendline is being tested right here and now. You can see gold strongly outperformed the COMPQ during the first 9 years or so before the ratio put in it's first peak in 2009. It formed a second peak that was slightly higher than the first peak but there was a very large negative divergence on the RSI and MACD indicators. Is this chart now suggesting that it might be time for the stock markets to start outperforming gold in a big way if the double top comes to fruition?

$GOLD:$COMPQ Gold - Spot Price (EOD)/Nasdaq Composite CME/INDX
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Lets look at the gold to SPX ratio chart that is showing a very similar pattern to the ratio chart above. Here I'm using a line chart that shows the ratio is breaking down from the unbalanced double top. You can see the beautiful inverse H&S bottom that was made back in late 1990s and early 2000s that launched the outperformance of gold to the stock markets. Keep in mind a big base leads to a big bull market and a big top leads to a big bear market which this ratio chart clearly shows. Also note the big negative divergences on the RSI and the MACD indicators. The question that has to be asked is the bull market that gold has enjoyed since 2000 compared to the stock markets coming to an end? Stay tuned as things are starting to get interesting.

$GOLD:$SPX Gold - Spot Price (EOD)/S&P 500 Large Cap Index CME/INDX
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Author: Rambus Chartology

Rambus
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