Gold ETF and the XAO as at 26/11/2010

The lower chart is a ratio chart of Gold/XAO. That's Gold in Ozzie Dollars compared to the All Ordinaries Index. The Gold ETF is currently outperforming the XAO. Since the Gold ETF has an inverse relationship to the XAO of about -0.7 (that's a strong inverse relationship) the outlook for the XAO doesn't look good. The inverse of that, of course, is that the Gold ETF is looking good.

I've been quietly confident that the XAO would turn around after retracement. We've had a significant retracement. And now looks like a logical time for a rebound to occur.

But the Gold ETF is raising doubts about that prognosis.

Am I merely succumbing to the general bearish tone in the market? Maybe.

Yesterday, on the blog, I indicated some concern about the technical picture available for the XAO. Today's action in Gold has intensified that concern.

It's still early days and the XAO while in retreat, looks like it will turn around at these levels. The RSI has broken above its down-trend line and the Slow Stochastic is looking positive. The uptrend line from early September was broken to the downside, then the XAO clawed back up to parity. That's all positive.

But, maybe, greater despondency is needed first, before we get a sizeable rebound.

Monday looks like a crucial day.

We shall see.

Cheers

Red