Wednesday, April 1, 2015

how now dow/gold?

the dow/gold ratio expresses the value of the dow in terms of a commodity that has a relatively fixed store of value. economists look at the dow/gold to get an idea of how the economy is doing ex-inflation and ex-monetary policy. here's how this looks:



we are channeling to the upside but just revisiting a resistance level from 2008. the larger picture of this has formed a large cup as in the cup 'n handle pattern which you can see in this big-picture. if we are following that pattern we should see a break above 15.2, perhaps to 16ish, followed by a shallow pullback. the break of that 16ish resistance should produce a rally to higher levels which technical analysis would predict to be around 26. all this means: dow up, gold down.

2 comments:

  1. What are you plotting in your chart - it's whited-out. Is there a reason for hiding it? I've never used PairRatio and was wondering what you use for the chart's stock symbol

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    1. Good question! What is under the white out is "/YM-/GC," which should plot the difference between the dow futures contract and the gold futures contract. But that's not what the chart is showing! The chart is showing the pairRatio, or /YM divided by /GC. This pairRatio is normally a sub-graph study in ThinkOrSwim and what I've done is HIDE the main chart graph of the difference in order to concentrate on the pairRatio. So to help avoid confusing people about what the chart is showing I have been hiding the "/YM-/GC" specifiers.

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