This is a weekly chart of the Gold ETF (GLD) which I watch on a daily basis. The metal has been trapped in a descending channel since the beginning of the year. About a month ago it looked like it might break out to the upside and those of you who read me regularly might remember I commented at the time that the chart was constructive. The last two weeks have been disappointing as GLD has attempted each week to break out to the upside (notice the long wicks at the end of the candlesticks) and has failed. The Relative Strength Indicator is ominously closing in on the 40 level (blue arrow in upper panel) and if it penetrates that level that will signal further weakening of the yellow metal.
What's Gold telling us? The same thing the US Dollar is and what I've been warning my readers about since 2010: deflation is alive and well underneath the mountains of liquidity central banks have pumped into the global economy and is more and more rearing its ugly head as the European and Chinese situations become more untenable and the global slowdown washes over to our shores.
I'm looking for a possible short term bounce tomorrow on the heels of the FED's June meeting minutes being released at 2 PM EST. If there is anything in those minutes that will provide "hopium" to stocks it will spark a rally. But I expect disappointing earnings will fuel another correction or worse going into August.