Posted: Tuesday, April 16, 2013 11:48 AM ET
On an even longer-term perspective, Gold had been in a huge uptrend for 10 years+. See the chart from Kitco below. After a long period of stagnation and consolidation in the 1990s, Gold went from around $300/oz. to nearly $1900. However, if this major uptrend was broken (as it appears it has been) -- a 50% simple retracement gives a downside level to watch in the 1000 to 1100 area.
Gold Long Term Chart
Finally, let's take quick look at volatility. The CBOE Volatility Index (VXX) measures the implied volatility of SPX options, and is pretty much the best measure of sentiment among option traders. After many years of higher volatility due to the mortgage and other economic crises, recently the VIX has been reaching multi-year lows around the 12 level. You can see the key levels and ranges to watch on the VIX going forward short-term and in 2013 -- 12 to 20 is a key range, 16 is a key level, and 30/40 look to be potential upside outliers.
VIX Daily Chart
The VIX has tended to be more of a "smart money" indicator in recent years, in my view, and if it shrugs off the recent events and heads back lower quickly, that could mean the rally in stocks may resume/continue shortly. Gold and commodities are another story, as they are charting a different course than stocks currently.
Also, currencies and bonds will play a part in the upcoming story. Will money flow further into the US Dollar (UUP) and Treasury Bonds (TLT) as it often does in times of uncertainty?
We're likely to see continued volatile moves in the coming weeks/months in my view in a variety of assets. It's prudent in general for traders to shorten holding periods during such times.
Disclosure: ETFTRADR and ROI premium subscribers have open positions in SPY & TLT options.
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