The general market last week continued to grind its way higher. Overall, I feel the market is very much overbought. We all know the market can stay in extreme overbought levels for extended periods of time making it very difficult to pick tops.

That's the reason I don't try to pick tops, but rather wait for a top to form before putting my money to work. While a bottom can be made in one day, tops tend to take days and sometimes months to complete.

A few things really stood out to me when looking back on last week's price action.

• 1.SPDR Gold Shares (GLD) - Get Report was only up 0.29% for the week, while the gold-mining stocks fund -- Market Vectors Gold Miners ETF (GDX) - Get Report -- was down more than 3.5%. This strong divergence really has me concerned about the price of gold in the near term. Gold stocks generally lead gold and if they are down 10 times more than gold like last week we better watch out.
• The U.S. dollar broke out and started to rally posting a gain of 1% for the week. It is definitely weird to see gold move higher when the U.S. dollar is rising.

Gold

Gold has been trading sideways or down since December. I see this large five-month pullback as a bull flag and expect to see much higher prices for gold long term.

But I don't count my eggs before they hatch so I continue to focus on the daily and intraday chart patterns for low-risk trading opportunities.

On Friday, we saw gold close very strong. It looks very much like a reversal candle, but with the price trading under the mini head-and-shoulders neck line and with the U.S. dollar in rally mode again I don't think the stars are aligned enough for me to put money to work just yet.

Gold is currently trading in a major congestion zone. Until there is a breakout of this zone I think setups won't be very accurate.

Dow vs. NYSE New Highs Divergence -- January

The chart shows the January peak in the stock market. As you can see, prices became choppy with strong up-and-down movements before we saw the sharp drop.

Also note the

New York Stock Exchange

new highs line. As the market became choppy, new highs began to drop quickly. This indicated the market internals were weakening and led to an 8% drop over the next couple of weeks.

Dow vs NYSE New Highs Divergence -- March

This chart looks much the same as January's. You can see the reversal candle from the February lows and the strong rally to the current price as of Friday.

Notice how the market is getting choppy. Last Thursday, the Dow gave us a reversal candle. But this time the reversal candle is to the downside.

Also note the NYSE new highs line. It has dropped sharply indicating the market internals are weakening once again.

This is what trading is all about -- finding things that are out of whack and waiting for a low-risk setup in order to make a profit.

In short, the stock market is overbought and about to roll over. I do understand that this grind higher could last another week or so which is why I am focusing on short, quick intraday movements and not buying exchange-traded funds to hold for a few weeks. As most of you know, I don't chase prices higher simply because downside risk increased when buying into a overextended rally.

I feel gold, silver and oil will move together and at this time I don't like their charts for trading. With any luck we could get some setups this week but I'm not counting on anything just yet.

Chris Vermeulen is founder of the popular trading sites www.thegoldandoilguy.com and www.ActiveTradingPartners.com. There he shares his highly successful, low-risk trading method. Since 2001, Chris has been a leader in teaching others to skillfully trade in gold, silver, oil and stocks in both bull and bear markets.