Don't Ignore This Chart!

Gold at 700 was the Beginning of the End

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Ditc20090312 Click here for a live version of this chart.

The S&P 500 Index (yellow line) hit its most recent high in early October of 2007 (red arrow).  Since then it's been all downhill.  Were there any clear warning signs before the plunge began?

It's interesting to compare $SPX to $GOLD (the red line).  After creeping upwards consistently (on a log scale chart) since early 2001, gold spiked up to 715 in mid-2006 but quickly retreated back to its normal uptrend line.  However, gold's rate-of-increase increased as soon as it crossed 700 the second time in late August (blue vertical line).  $SPX began its fall soon afterwards.

Last November $GOLD retreated back to 705 before rallying again in the face to more bad economic news.  This suggests that the 700 level is important for both stocks and gold.  $GOLD probably needs to move below 700 in order to $SPX to begin a sustained recovery.

Chip Anderson
About the author: is the founder and president of StockCharts.com. He founded the company after working as a Windows developer and corporate consultant at Microsoft from 1987 to 1997. Since 1999, Chip has guided the growth and development of StockCharts.com into a trusted financial enterprise and highly-valued resource in the industry. In this blog, Chip shares his tips and tricks on how to maximize the tools and resources available at StockCharts.com, and provides updates about new features or additions to the site. Learn More
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