Stocks traded lower today following a volatile trading session in which the market ticked into positive territory shortly before noon. The Dow, S&P, and Nasdaq Composite fell modestly in response to weak Big Tech earnings.
Treasury yields fell, too, buoying equities alongside a sinking dollar.
According to the US Dollar Index (NYSE: DXY), the dollar has now broken support (yellow line) at the early October lows. DXY also set a lower high over the last few weeks, which has been a predecessor to dollar downtrends this year when DXY crosses below the 10-day moving average as well.
The Fed’s struggles with inflation threaten to sink the dollar even lower. Many investors believe that Fed Chairman Jerome Powell will soon decrease the size of his bank’s rate increases. If the Fed scales its tightening campaign back, the dollar should fall precipitously along with yields, pumping stocks and precious metals higher in the process.
That’s presenting gold traders with a huge opportunity after the SPDR Gold Trust (NYSE: GLD) set a higher low relative to the low of late September.
GLD hinted at a longer-term breakout last month before ultimately trading below the 10-day moving average again. Back in July, GLD gave us a similar bearish move that ultimately became a nice bullish setup. This is what it looked like:
GLD ran almost 4% higher – that’s a big move for GLD – from our entry trigger before peaking. Another blast higher of that nature seems to be forming.
GLD also closed above its minor bearish trend (yellow trendline) and the 10-day moving average last week. Today, GLD didn’t trigger a bull position just yet, allowing traders who missed the setup a second chance to take a trade here.
The stochastic indicator is reading below 80, suggesting that GLD is not yet overbought.
For those reasons, it might make sense to take a bullish trade on GLD with a trade trigger of $155.85, above today’s high, as the general market anxiously awaits additional Big Tech earnings.