Technical Outlook: Gold, Oil and a remarkable multi-decade perspective on Equities  Technical Outlook: Gold, Oil and a remarkable multi-decade perspective on Equities  Technical Outlook: Gold, Oil and a remarkable multi-decade perspective on Equities

Technical Outlook: Gold, Oil and a remarkable multi-decade perspective on Equities

Kim Cramer Larsson

Technical Analyst, Saxo Bank

Summary:  After a few years with little interest, gold initiated a long uptrend in 2002. It lasted almost 10 years, topping out just below $2,000 per troy ounce.


After a few years with little interest in late 1990s and early 00s, gold initiated a long uptrend in 2002. It lasted almost 10 years, topping out just below $2,000 per troy ounce. The precious metal had then formed a bubble pattern that burst in 2011; this was followed by 5 years of bear market before buyers took control in 2016.

The rule of bubbles, and the implosion thereof, is that the instrument in question always comes down to at least the larger correction occurring during the uptrend, also called a pre-peak. 

For gold this large correction—or pre-peak—occurred during the financial crisis in 2008-2009. Gold dropped to the peak of this correction/pre-peak level and the 0.50 Fibonacci retracement level (in other words, 50 percent of the bubble uptrend), just a few dollars above $1,000.

Slowly buyers came back to buy gold and made the precious metal form a rounded bottom, eventually taking it to new highs in 2020 when it peaked above the $2,000 mark. A short correction followed until the war in Ukraine resulted in renewed demand for gold with the shiny metal testing its all-time high. This got rejected but a new attempt seems likely. 

Gold has formed what looks like a cup and handle pattern: B is the bottom of the cup and C is the handle. 

The cup and handle pattern is confirmed if gold performs a daily close above peak A at $2,078. If this scenario plays out, we can then calculate possible targets. As a minimum gold should reach 1.618 projection of the handle height—in other words, a price target of around $2,328. Based on the full cup the price could potentially reach 1,618 projection of the distance between A and C—around $2,578. If demand deteriorates and gold breaks below $1,673 (the bottom of the handle), this cup and handle scenario is busted and a downtrend will unfold towards $1,500-1,350. 

However, with the Relative Strength Index (RSI) showing no divergence and back above the 60 threshold, the bullish picture is supported.  

Oil is in a bit of limbo these days after some panic moves higher followed by massive selling pressure. 

Brent Crude oil broke above strong resistance at $126/brl shooting even higher to 1.382 Fibonacci extension of the third wave (that means when third wave is the length of 1, the fifth is the length of wave 3 x 1.382) in what looks like an exhaustive fifth wave. 

However, when wave 5 is extended as it seems to be, it often extends to 1.618 times the length of the third wave—i.e., to around $148/brl. The all-time high recorded back in 2008 was $147.50. 

At the time of writing Brent oil is back below resistance levels and trading in the consolidation area from 2012-2014—between $100 and $115. It seems like the uptrend is exhausted, at least on the face of it, but buying could resume. 

Technically there is no divergence on RSI indicating we could see higher levels, possibly testing the all-time high around $147.50. However, if Brent closes below this month’s low at $98.30 the selling pressure could push Brent lower towards 0.764 Fibonacci retracement of the fifth wave, at around $83/brl.

Dow Jones Industrial Average Index

Going back 40+ years the stock market has experienced periods of longer-running bull markets followed by almost as many larger corrections and even a couple of market crashes.

Examining these historic uptrends and corrections a bit closer we can see that in the build-up to every single larger correction there have been warning signs in the form of divergence in the market. Divergence is an indication of an imbalance and can been read from technical indicators such as RSI, MACD and volume. If price is rising under falling traded volume it is a sign of weakness. Similarly, it is a sign of a weakening trend if prices keep rising but the RSI is falling; that is exactly what we have seen in the run-up to market peaks and corrections. 

As can be seen from the Dow Jones Industrial Average Equal Weight Index chart there was divergence up until the 1987 crash where Dow Jones lost 40 percent. There was also divergence during the dot com and housing bubbles.

Divergence—or imbalance—can run for a long time but must eventually be “traded out”. That can be done when the RSI drops below the 40 threshold. When that occurs divergence is cancelled—or reset, so to speak. Over the past 2-3 years equity markets around the world have been building up massive divergences. Markets have been moving higher but RSI values have not achieved greater highs.

Granted we have seen larger corrections—most notably in 2020 when the Covid scare hit equities—but even that sell-off was not enough to push the monthly RSI below 40. The bull market that followed has just added to the imbalance in the market, building more divergence. However, now could be the time that divergence will be traded out. The FAANG/TINA (There IS No Alternative if you wanted a return on your money) bull run has run longer than the dot com bull market and has the longest-running divergence in the past 40 years. 

The strong bounce on the back of the Covid scare sell-off and continued bull run has reached 1.618 projection (of the Covid scare sell-off mini-crash), and seems to have exhausted. The downtrend is confirmed on both daily and weekly periods, and a monthly close below 32,985 will confirm the longer-term uptrend to be over.    

Dow Jones is currently testing 0.236 Fibonacci retracement of the uptrend since the Covid low. Support is not strong around these levels and the Dow Jones could drop to the 0.382 retracement which coincides with the market peak before the Covid scare hit markets, at around 30,000. 

However, a drop to 30,000 is not likely to push the RSI below 40—in other words, it won’t unwind the divergence. And it will still be quite far away from its 55 Simple Moving Average (SMA). It is not unlikely the price and the SMA will catch up.

If the Dow Jones closes below the pre-Covid scare peak at 29,568, which is not unlikely, the bear trend could be further fuelled. If that scenario plays out the longer-term rising trend line could be tested with a drop to the 0.618 retracement at around 25,000. 

For this likely scenario to be demolished and reversed, the Dow Jones needs to perform at new all-time highs.   


Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (
- Analysis Disclaimer (
- Notification on Non-Independent Investment Research (

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000

Contact Saxo

Select region


The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.