Gold and the Dollar Could Ignite Some Excitement

The 30-day moving average of the advance/decline line will get overbought this week.

This indicator is a moving average, so let's look back at the numbers it is dropping from 30 trading days ago.

When it is dropping a long string of big negative readings, we call the market oversold. That was one reason why I called for an Easter rally.

Today and tomorrow represent the final two days in that long string of negative readings. Beginning on Wednesday, we will drop a very long string of positive readings. After tomorrow, the next 14 trading days will drop only two negative readings.

Here it is numerically:

Dropping the Numbers
Day	30-day moving average
Wednesday	2215
Thursday	18
Friday	1622
Monday	642
Tuesday	1010
Wednesday	-2187
Thursday	695
Friday	1381
Monday	-777
Tuesday	1713
Wednesday	1410
Thursday	2148
Friday	49

Now here it is in chart form:

Last fall, the 30-day moving average got overbought, but it didn't matter, as the market went up anyway. However, it did have a long string of positive readings like this one back in late November, ahead of Thanksgiving. While it didn't crush the market, the S&P 500 lost almost 20 points in one day. It took the Nasdaq nearly two months to overcome the November high.

I've been looking for a peak in the market this week, and I continue to do so, especially because the shorter-term overbought/oversold oscillator is also overbought. Whether that peak lasts for long will depend on what sort of decline we get from this overbought reading.

Finally, let me get in a word about gold. It is now sitting at $690 on the June contract. Let's look at the weekly chart.

I've been a vocal bull on gold and have been looking for a stair-step upward move, but gold has now gotten to an important point. If it breaks out of this big triangle pattern on the weekly chart, we should see a lot of excitement. My target has been in the $720-$730 area, but longer term, that triangle measures to $870. For now, I'll stick with the near-term target of $720-$730.

The U.S. Dollar Index has been down for four consecutive days. That's no bell-ringing number, but if you squint (and maybe get out a magnifying glass), you can see the dollar is breaking down, or at least trying to. I suspect the dollar and gold folks are keeping close tabs on these two potential breakouts. And if either one gets saved from breaking out, the other is likely to do so as well.

While everyone is focused on earnings this week, these two charts might spark some excitement.

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At the time of publication, Meisler had no positions in any stocks mentioned, although holdings can change at any time.

Helene Meisler writes a daily technical analysis column and TheStreet.com Top Stocks. For more information, click here. Meisler trained at several Wall Street firms, including Goldman Sachs and SG Cowen, and has worked with the equity trading department at Cargill. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. She appreciates your feedback; click here to send her an email.