A look at the charts shows that stocks and precious metals are headed for an imminent correction.Last week I wrote how the markets looked very similar to the way they were at their January peak, from where prices dropped nearly 10%. And as I expected, we did get the first sign of toppy market in the form of last Friday's sharp selloff. Today, we are now that much closer to a 3-8% drop, which is shown in the charts below. It's important to remember that bottoms tend to happen quickly while a market tops happen gradually. This is why so many investors take big losses trying to tip a top. The market will continue to move up even when it is very overbought. It's only when extreme levels are reached that investors should try to play tops.
The VIX: Fear or Complacency
NYSE New Highs-Lows Index
Dow Jones Industrial Average - Daily Trend Chart
- Market is overbought and in dire need of a pullback.
- This steady rally has been much longer than a normal one.
- The rate as which prices are rising is too steep to be maintained.
- The market is trading at the parallel trend line.
- VIX is telling us people are buying and not worrying about any possible drop.
- NYSE divergence is screaming overbought.
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