Gold ETF GLD may have bottomed here

The gold GLD ETF is once again at a crucial juncture!  By the way is it ever not at a crucial juncture?

The recent decline we have seen over the last 8 days or so has been sharp and fast and may leave many wondering, “is gold done for now?”.  I do not believe this to be the case.  I also do not believe that we have formed a double top in gold as some have talked about.

Instead what I am seeing right now on the gold GLD ETF is a normal 50% retracement of the very sharp rally that began on January 15th, 2009.  There is no question that the rally that began then was strong persistent and covered a good amount of ground.  A retracement definitely was to be expected although I am a little surprised how fast and deep it was to be honest.

But here are two key points with respect to where we are right now in this correction.  GLD has pulled back to it’s 50 day simple moving average which should act as support.  We already know that GLD did achieve a golden cross (50 day moving average crossing over the 200 day moving average). So these two facts are already quite bullish for gold.  By the way how many other indices, stocks or commodities can brag about having accomplished the coveted golden cross now a days??? Not too many.  All the more reason to give the benefit of the doubt to the bulls on GLD.

The second bullish factor that has come into play with the GLD is the volume analysis.  If you look at the chart above you can see that today’s decline was on roughly 19 million shares, but it is important to compare this declining volume to the advancing volume we saw previously and at similar levels.  So we compare it to that 34 million share day price swing.  That my friends is a reduction of 44 percent which is quite bullish in my opinion.  It is hinting that GLD which anyway is at good support at the 90 level does not have the downside energy to keep falling.  We should expect a sharp reaction back to the upside and if we are lucky a price smoothing that holds the 50 day moving average.

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