The Recent Intraday Divergence in Gold GLD

For those who follow gold and the S&P 500 closely, you've certainly noticed that prices are diverging after GLD's (NYSE: GLD) peak on March 3rd while the SPY (S&P 500 ETF) continued on to new recovery highs and *may* have peaked Friday.

Let's take a look at the 30min combined chart to see the positive relationship... and where it recently hit the rocks.

(Click Image for Full-Size Chart)

The Gold color is the GLD ETF, scaled on the left axis while the black color is the SPY (S&P 500) ETF, scaled on the right side.

With few recent exceptions, these ETFs move in lock-step, with gold sometimes having a very slight lead in turns in the SPY (and sometimes vice-versa).

Everything has been perfectly fine in this relationship until Gold in early March (3rd) last week began trailing lower and diverging from the continually rising (non-stop!) SPY (and other US Equity Market Indexes).

It's possible that the SPY formed an ‘exhaustion' gap early Friday morning and will now begin heading lower, following the prior decline in gold prices from last week until present.

This is why inter-market relationships can be important - when one market cleanly deviates (diverges) with expectations, it can send a signal that "all is not well" and could precede key turns as the relationships head back into balance.

Keep a close watch on these two ETFs and how this situation resolves itself this week.

Corey Rosenbloom, CMT
Afraid to Trade.com

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