Wednesday 2 October 2013

Similarities between the S&P in early 2009 and gold today


I’ve touched on the subject before but today the similarities have increased even more!

 
1)      In 2009 we had a very large reverse head and shoulder pattern (indications in red) in the S&P500 which signalled a potential bottom after the 2008 bear market. The right shoulder of this pattern was in itself a (normal) head and shoulder (in green). A normal H&S argues for lower prices while a reverse H&S points to higher prices. Obviously one of the 2 has to fail and in that case it was the bearish pattern that failed, giving a clean signal that the trend was up

2)      If you look more closely to the green pattern in the SPX, you can see that prices perforated the neckline and after a couple of internal days they reversed strongly up, triggering a bear trap

3)      Now look at the 2nd chart, showing gold as of today. You can see exactly the same pattern developing, including a break and the potential failure!


To be more confident that the pattern is going to repeat itself, we have to wait for gold to close above 1400, where the neckline passes but I suggest a close monitoring of price action since gold can move very fast sometimes.

  
SPX                                                                                                                                                                                                                                                       


GOLD