One correlation in the commodities market could point to new S&P 500 highs

Stocks are fighting to take back record levels this week.

One technician is looking in an unusual corner of the market for proof the S&P 500 can build on the rally.

"In the commodity markets, we're encouraged that the price of oil is outperforming the price of gold," Ari Wald, head of technical analysis at Oppenheimer, told CNBC's "Trading Nation" on Monday.

"Oil, typically the more economically sensitive commodity, [is] outpacing gold, which is typically more a safe haven, we see that as a sign of bullish risk appetite," Wald said. "We think it confirms our positive view of the market and argues for a continuation of this advance."

West Texas Intermediate crude has been on a tear this year, rallying 19 percent, and trading at levels not seen in four years. At the same time, gold has been under pressure. The yellow metal has fallen 8 percent in the year to date.

Oil's outperformance relative to gold is just one bullish indicator Wald sees in the market.

"The primary reason we're positive here is one, the indexes' breakout through January resistance; two, internal breadth is broader than many give it credit for; and, three, we're generally missing the typical conditions exhibited at a market top," he said.

The S&P 500 and Dow Jones Industrial Average bounded to new highs last week, the latter for the first time since January.

Gina Sanchez, CEO of Chantico Global, said trade issues have been the biggest driver of commodities markets this year and any escalation could soon hit risk appetite.

"The relationship between gold and oil right now may actually be significantly impacted by this continued trade war," Sanchez said Monday on "Trading Nation." "You could actually see some oil weakness if this trade skirmish escalates to be a full trade war. ... The very thing that could actually halt the market, could also halt the relationship between these two commodities."

The U.S. is reimposing sanctions on Iran in November, taking its oil supply out of the market and potentially sending prices higher. However, an escalating U.S.-China trade war could hit global demand and send prices lower.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's Closing Bell (M-F, 3PM-5PM ET). In addition, he contributes to CNBC and CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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