The backbone of the Dow Gold Ratio Strategy is a type of chart called a Ratio Chart. When used, the chart will show you how one stock or index is performing compared to anther. The most important ratio charts are those comparing indexes.

In the Dow Gold Ratio chart, usually the Dow or S&P 500 is first (or on top) and Gold is second (or on the bottom.) If you are using Stockcharts.com for charting as I do, then the symbols to chart the Dow Gold Ratio are $INDU:$GOLD. When this chart is rising, the Dow 30 is outperforming Gold. When this chart is falling, then Gold is outperforming the Dow 30.

Understand that these charts do NOT show whether the Dow 30 is falling or if Gold is falling. In the case of a rising ratio chart where the Dow 30 is outperforming Gold, both can be going up at the same time. In this case, the Dow 30 is rising FASTER than Gold. It does not imply Gold is falling.

Another example is to put a slow rising stock, say FPL, on the bottom and AAPL on top. The Stockcharts symbols would be AMZN:FPL. Amazon is a fast growing stock and Nextera (FPL) is an electric utility. You would be correct to expect this chart to be rising.

Ratio Charts are Relative Performance charts. They don’t tell you if one or the other is rising or falling. They tell you which is performing better. Yes, you can have a rising chart when the one on top is running flat and the bottom stock is falling. Or you can have a falling chart when the one on top is falling with the bottom one trading sideways.

When you are investing in the S&P 500 companies, use the $SPX:$Gold symbol. When you are investing in the Nasdaq 100, use QQQ:$gold. When you want to know if Silver or Gold is the better place to be, use $Gold:$Silver.

The chart, $SPX;QQQ has been trending down for almost 20 years. You should immediately know that QQQ is the better investment currently. Instead of looking at the Dow Gold ratio chart, you should be using the QQQ:$Gold ratio chart.

This is most poignant as I write this as the both the Dow Gold ratio chart and the S&P 500 Gold ratio charts rolled over (down) in 2019. Yet the QQQ Gold ratio chart is still going up.

If you were to have a 50% S&P investment with SPY and a 50% Nasdaq 100 investment with QQQ, then the S&P investment should have been moved to gold back in 2019. The QQQ investment should be maintained until and if the QQQ:Gold chart rolls over.

In other words, use the ratio chart that best fits what you are invested in. The Dow Gold ratio chart is not necessarily the one that calls every market.