In our last article, we mentioned about that gold prices are in the cusps of renewed volatility. The question is, will the volatility break gold prices out to a new record high or will it break it down to a low?
Yesterday, gold price surged US$20 with high volume of trading. Gold prices had not jumped so much for quite a while already and in the minds of many trend following traders (in the context of gold prices forming a technical pennant) this is indeed a buy signal. In the days to come, if this upward momentum is sustained, this will attract the attention of the mainstream media.
But is this the time to short stocks? Let’s take a look at this Point-and-Figure
This indicator tells us the percentage of stocks in the NYSE that are currently under “Buy” signals. Unlike the other index (e.g. Dow Jones & S&P), this is a very ‘democratic’ indicator in the sense that each stock is given an equal share of one ‘vote.’ It is used as a contrarian indicator to tell us when the market is in extreme bullish position or not. As the chart shows, it is current down to 77.23%, from a high of 80%. As you can see from the chart, 80% is an unprecedented high since 2001. The market is at a very high risk territory for a reversal.
Currently, this Point-and-Figure indicator is not officially in trend reversal status yet. But it will be soon if more stocks comes under “Sell” signal.
