Investors turned away from gold for a long period of time after the decline in gold prices that started late 2012. However gold seemed to find a solid support at the end of 2013. The daily chart of GLD, the SPDR Gold Trust Shares shows that gold started to get bullish at the beginning of 2014. OBV confirms it too as volume is higher on up days than down days. Rising OBV reflects positive volume pressure and can lead to higher prices. GLD had a golden cross in late March when the 50-day moving average crossed above the 200-day moving average. Gold is a great alternative asset class and gives opportunity for portfolio diversification especially during an equity market decline. Gold has low correlation with the S&P 500 and long-term Treasuries too as you can see in the indicator window below the chart. And that is exactly what you want during a market decline.
As stocks lost traction so far this year, investors turned to long-term treasuries for better performance. Treasuries especially long-term treasuries performed much better than the S&P 500. The daily chart below shows TLT, the iShares 20+ Year Treasury Bond Fund ETF with On Balance Volume in the indicator window along with price relative to the S&P 500. OBV started to show a bullish divergence from September, 2013. Starting this year price relative has been showing that TLT clearly outperforms the S&P 500. Early March there was a golden cross, the 50-day moving average crossed above the 200-day moving average, which confirms that investors have more confidence in long-term bonds at least until stocks find a firm support.
The hourly chart below shows SPY, the S&P 500 ETF with ATR (Average True Range) in the indicator window. ATR is a volatility indicator calculated from the True Range which uses absolute price changes. ATR is not a directional indicator it reflects the degree of interest or disinterest in a price move. Strong moves in either direction are often accompanied with large True Ranges. An increase in ATR can show strong buying or selling pressure. As you can see on the chart below Friday’s sharp decline took place with increased ATR on the hourly chart.
$NYMO, the NYSE McClellan Oscillator turned negative again as you can see on the chart below. The McClellan Oscillator is a breadth indicator calculated from Net Advances. Net Advances are advancing issues less declining issues in this case on the New York Stock Exchange. The McClellan Oscillator puts momentum into the AD line. It is positive when the advancing issues are dominating and negative when the declining issues are dominating. Notice also on the chart below the bearish divergence. $NYA reached new highs last week but $NYMO failed to reach new highs and didn’t even go above 20.