Gold Also Rides Between the Two Sigma Bands

Oct 18, 2010: 12:59 PM CST

This weekend, I showed how the S&P 500 has been riding between the first and second Standard Deviation (also called “Sigma”) Bands.

It turns out that Gold prices also have been carefully contained within the boundaries of the same type of Deviation Bands – an extension of Bollinger Bands – as seen in the chart below:

Refer back to the original S&P 500 Post for the full definition of Sigma Bands and how to create them.

The quick refresh is that this is a Hyper-Bollinger Band Chart that shows the first through fourth Standard Deviation lines above and beneath the 20 day mean (average).

As I’ve highlighted with arrows above, Gold futures contract prices have also stayed comfortably between the first and second Standard Deviation – or Sigma – Band for most of the rally up off the August low – similar to that of the S&P 500 recently.

The Sigma Bands have defined the high and low of the intraday trading session many times as you can see – and knowing these price levels at the start of the trading day can be very helpful for intraday traders.

This may be a random coincidence, but it’s interesting and shows how deviation bands – like the Bollingers – can be helpful in assessing how to trade these markets on a short-term basis.

Corey Rosenbloom, CMT
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1 Comment

One Response to “Gold Also Rides Between the Two Sigma Bands”

  1. David O. Says:

    Great Corey…gotta love those 'Sigma Bands'!