Another interesting development from today is gold finally starting to show some signs it is reversing from its recent pullback. It bounced off the 900 an ounce and 50 SMA level.
The pullback has set up a bull flag with a possible breakout around 930-940 on the gold contract price and around 92 for the ETF, GLD.
Is it possible for the stock market to rally while gold is moving up? Strange as it may be, the answer is "yes". Gold has been going down while the stock market also been going down. There seem to be a battle between inflation and deflation. When the market is going up, investors are looking at possible future inflation due to all the TARP and bailout liquidity injections. And when the market is going down, investors is worrying about the recession is worsen and the falling commodities prices potentially lead to deflation. Until the market has determined which scenario is most likely for the economy, I would not be suprise to see gold to rally along with the stock market if the bear market rally does materialize.
