Six sessions ago we noticed that the Gold/Silver Index (XAU.X) was breaking below our upward trend, but today the XAU.X has made a powerful move higher. I noticed yesterday's move higher, but didn't want to take a long position in the index as it was still below an old downward trend. What a difference a day makes. Any bullish trades at current levels would be using a trader's stop of $48. I've placed a "confirmation" level on the chart below that shows even though this index did break upward trend, that break was never confirmed. This is a technique that traders can use to try and sniff out some short-term breaks of trends that are often time reversed. I wish I had seen this yesterday and had an action plan in place to benefit at the open this morning. Now we must recognize this pattern and try to benefit from it if we see it somewhere else in the future.
Gold/Silver Index (XAU.X) Chart - last seven months
Yesterday the XAU.X was one of the only sectors to perform to the upside. That divergence may have had some traders looking long this morning. I certainly wish I was one of them, but I wasn't. If this index were to close above the 200-period MA at 49.80, I would not think some type of long position in a gold stock is out of the question. Names that trade very much like this index are ABX and NEM.