I indicated the move out of this FIB week would be of importance going forward for 34 weeks after.
Today, exactly 3 trading days beyond the FIB ending week of the 24th, GOLD DECLINED $100 dollars. The decline was on heavy volume, filling up gaps and creating a BEARISH ENGULFING PATTERN.
On FEB 15TH, I also pointed out the close relationship between EURO investment and GOLD investment. I also indicated that it is my belief, that a credit event either with a bank or country, could force the hand of banks or countries to unload their GOLD stock.
The EURO today saw heavy selling on increased volume, creating a lower high on daily chart.
The US Dollar found solid support at the 200 sma on daily; creating a bullish engulfing pattern.
It is my contention based on history, markets can not find bottoms unless the DOW:GOLD ratio moves closer to 1 to 1 or 1 to 2. Currently it takes 8 Oz's of GOLD to buy ONE SHARE OF THE DOW.
This chart divides GOLD by the DOW and shows the relationship is testing an uptrend line of significance.
Conclusion:
The DOW/GOLD ratio is directly affected by the action in the EURO and the US dollar.
The parabolic move in GOLD has been quickly taken back and might foreshadow the next move in the indexes.
FIB WEEK analysis suggest the move by GOLD after 21 FIB WEEK ending 24th, could foreshadow the next leg in GOLD.
GOLD/DOW ratio shows the broad indexes can not move higher; if the commodity indexes are moving lower. A compression in GOLD, will mean a compression in stocks.
The EURO and US dollar play a pivotal role in the direction of GOLD and the DOW. Both currencies are at make or break pivot areas.
Will GOLD/DOW be supported at the up sloping trend line? Will the EURO hold its pivot? Or will the US Dollar break higher and DOW/GOLD break below its upward trend setting up a new trend?
Tim Kathlina
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