Gold bugs rejoice! The long-awaited return of profits, glory, and bullish revelry is upon us. After a four-year sojourn in bear country gold, the mighty magic metal, is finally ascending. Like a phoenix from the ashes, baby!

Hell hath no fury like a twice neutered and thrice beaten bull that’s been unleashed. Let’s have a moment of silence for the slew of short-sellers that were just gored by the golden bull.

In light of the epic moonshot in GLD last week I thought it appropriate to take a renewed look at the yellow metal to see what kind of ground has been reclaimed and what traders should pay attention to going forward.

For starters, how about that trend change? GLD is the highest it’s been above the 200-day moving average since 2012. The melt-up smashed the descending trendline that has defined GLD’s downtrend since it began in earnest in early 2013. What’s more, last week’s explosive volume was the highest seen since the harrowing axing that took GLD down 13% in two days back in April 2013.

While I think you’d be crazy to chase GLD here, if the trend reversal is legit then changing stripes from selling rips to buying dips may well be the way to go. Watch for a retest of the trendline as well as the 200-day moving average. If the bulls can carve out a nice higher pivot low north of the long-term average, consider their beachhead established.

What I think will be interesting is how GLD reacts when the stock market finally finds its footing. If scared money is the only thing propping this thing up, then consider the upshot ephemeral.

Yet another way to view the turnabout in gold is the Dow/Gold ratio. Basically it’s a stock/gold ratio with the Dow Jones Industrial Average standing in as the stock proxy. The ratio is plotted as a line which rises when the asset in the numerator (stocks) is outperforming and falls when the asset in the denominator (gold) is outperforming. Ratio charts are a great way to compare assets to determine where relative strength lies. For context I provided a longer-term view of the ratio below. With gold on the ropes and stocks ripping for the past five years the ratio was entrenched in a solid uptrend …. until this past month.

As noted in the blue circle the ratio just took a nosedive breaching the multi-year trendline. Gold is now solidly outperforming stocks for the first time since the yellow metal peaked in 2011. If gold lovers want to press their advantage now’s the time.

Financial freedom is a journey

The Tales of a Technician series is brought to you by Tackle Trading.

Sign up now and gain unfettered access to all of the quality content and powerful Scouting Reports that our Pro Members enjoy for 15-days absolutely free with no strings attached and let us show you what your trading has been missing.

# Sign up now for a 15-DAY FREE TRIAL #

Legal Disclaimer

Tackle Trading LLC (“Tackle Trading”) is providing this website and any related materials, including newsletters, blog posts, videos, social media postings and any other communications (collectively, the “Materials”) on an “as-is” basis. This means that although Tackle Trading strives to make the information accurate, thorough and current, neither Tackle Trading nor the author(s) of the Materials or the moderators guarantee or warrant the Materials or accept liability for any damage, loss or expense arising from the use of the Materials, whether based in tort, contract, or otherwise. Tackle Trading is providing the Materials for educational purposes only. We are not providing legal, accounting, or financial advisory services, and this is not a solicitation or recommendation to buy or sell any stocks, options, or other financial instruments or investments. Examples that address specific assets, stocks, options or other financial instrument transactions are for illustrative purposes only and are not intended to represent specific trades or transactions that we have conducted. In fact, for the purpose of illustration, we may use examples that are different from or contrary to transactions we have conducted or positions we hold. Furthermore, this website and any information or training herein are not intended as a solicitation for any future relationship, business or otherwise, between the users and the moderators. No express or implied warranties are being made with respect to these services and products. By using the Materials, each user agrees to indemnify and hold Tackle Trading harmless from all losses, expenses and costs, including reasonable attorneys’ fees, arising out of or resulting from user’s use of the Materials. In no event shall Tackle Trading or the author(s) or moderators be liable for any direct, special, consequential or incidental damages arising out of or related to the Materials. If this limitation on damages is not enforceable in some states, the total amount of Tackle Trading’s liability to the user or others shall not exceed the amount paid by the user for such Materials.

All investing and trading in the securities market involve a high degree of risk. Any decisions to place trades in the financial markets, including trading in stocks, options or other financial instruments, is a personal decision that should only be made after conducting thorough independent research, including a personal risk and financial assessment, and prior consultation with the user’s investment, legal, tax, and accounting advisers, to determine whether such trading or investment is appropriate for that user.