How to Find Market Tops for Gold & the Dow

Last week the general market continued to grind its way higher for yet another week. Overall I feel the market is very much over bought. We all know the market can stay in extreme overbought levels for extended periods of time making it very difficult to pick tops.

This is the reason I do not try to pick tops, but rather wait for a top to form before putting my money to work. While a bottom can be made in 1 day, tops tend to take days and some times months to complete.

A few things really stood out to me when looking back on last week’s price action.

1. Gold (GLD Fund) was only up 0.29% for the week while the gold mining stocks (GDX Fund) was down over 3.5%. This strong divergence really has me concerned about the price of gold in the near term. Gold stocks generally lead gold and if they are down 10x more than gold last week, we better watch out….

2. The US Dollar broke out and started to rally posting a gain of 1% for the week. It is definitely weird to see gold move higher when the US dollar is rising…

Gold GLD Daily Chart

Gold has been trading sideways/down since December. I see this large 5 month pullback as a bull flag and expect to see much higher prices for gold long term