GOLD Trend - 21&72 DMAs Dead Cross ahead of the 200 Resistance-Day MA

Volatility Breakouts usually signal trend reversal and so far we witness one in GOLD.

GOLD is developing a Falling Wedge pattern which has a Bullish implication if broken on the upside so I remain cautious in the meantime since we see a logical bounce off the important 1160 Support as marked on the chart. Lower stands 1140 Support area along with the 200-DMA at 1146 which is a very tough layer of Support to crack at least on the first attempt, IMHO.

I expect a retreat to 1200 Resistance first marked by the Trend line and the 21-Day MA.

The Bearish scenario is supported by the 21 & 72 - Day MAs Dead Cross, the sustained fall in the Rate of Change and the rise in the ADX reading above 26 which signal trend acceleration and at the moment the Trend is DOWN until proven otherwise.

GOLD Trend - Momentum is Fading

GOLD has been actively watched in the last months as it has been making new highs and touted as the ultimate Inflation protection vehicle. Inflation is not easy to find right now as several measures of the monetary velocity show a deflation threat is still intact and FED seems reluctant to signal end of QE with dismal Industrial Production data released a week ago.

Technically speaking GOLD tested the Trend line Support below 1200 and is now reaching a confluence of Resistance levels: the former Dec'09 Close and Open around 1216 and the 50-Day MA sitting on the same level. The Momentum since the May '10 top is fading and we could see how the Labored move failed with a volatility break which is a good signal of a possible Trend change. ADX has already given a Short signal.

US Treasuries 2y/10y Spread Flattening

The 2y/10y Spread has possibly reached a reversal point in its flattening move.

Interesting to watch are the 10-Year bond price to S&P correlation which might indicate more economic hardship ahead and equity weakness. The same is indicated by the 10-Year yield to the S&P.