The ratio of the price of Oil to the price of Gold has been hovering at record highs and moving in a tight range. This comes after a fast run up. But technically it is reaching a point where that consolidation could end after 2 months of tightening the range. Which way will it break?
The chart below gives more detail. From a low in September 2017, the ratio rose rapidly to its 200 day SMA at the end of the month. It paused there briefly before then driving higher to the top in late January. It pulled back to its 100 day SMA in February and then bounced. The bounce ended later than month and it fell back to the 100 day SMA in March. Hmmm, have we heard this story elsewhere, like the equity markets?
It is the last 2 weeks where it has printed a different story. Since that second touch at the 100 day SMA, it has moved higher and retested the top from January. But it has not pulled back. Instead it is building a bull flag over the February spike. As it does this the rising trend support is rapidly approaching the top line resistance, squeezing the range. One of the two has to give.
Will it be a break out to the upside? This would fit nicely with the longer term chart of Crude Oil that is showing bullish tendencies. Or will it fall back, through support and through the 100 day SMA? The 200 day SMA would be the next logical target then. Or has it morphed into a sideways consolidation, befuddling all. We will have to wait and see. Momentum favors the upside break, but nobody really knows what will happen.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.