The GLD Gold ETF is sitting on critical support similar to the way the GDX ETF is in my previous posting.

We need to see the gold price hold support here.  The GLD has broken out and above the long resistance line shown in the chart on confirmed valid volume.  One of the most common things you will see on any stock price chart is the return of price to previous resistance.

In this case the breakout was at about 90.93 on the GLD ETF and now we see clearly that price has retraced right back to this support. and volume has dropped off on the decline although it is a bit heavier than normal.  So again, price returning back to resistance line is quite normal price action and should have been expected given the old owners near the 100 level on the GLD.

A theory I have been postulating on the nature of this run in GLD is that price will move faster than it has before the higher above 90 we are. The reasoning for this is that we have less and less resistance on the left side of the chart. This correction we have been in the last several days has been sharp and swift. Could we expect a sharp and swift reaction back to the upside that quickly tests 100 level again? It is possible.  And the reason it is possible is because there is less resistance on the left side of the chart.

If you look at the shaded orange area in the chart above you can see how little price there is to hold us back. And of course above 100 there is zero price holding us back.

It is going to be interesting to see how GLD holds up on this new support now.  Breaking down below 90 would not be a good sign at all.

But for now there are enough positive signals to suggest that we will hold here.

 
The GDX ETF (Gold Mining ETF) is at a crucial juncture right now. For the past 7 or 8 months the GDX has built what appears to be a very large head and shoulders bottom formation.  In late January you can see from the above chart that the price on the GDX was able to break out of the pattern (above the neckline) on high volume and a sign of strength.  The breakout is represented by the first closing green bar that is above the neckline in the chart above.

Since the breakout the GDX has had a somewhat modest rally which was going against a generally very negative broad market.  Now the broad market is breaking down again and it seems the GDX mining index is unable to buck the trend this time.

Today it pulled right back to the neckline support at 31.09.  This is a critical area.  Pullbacks to support like this and especially the neckline of a large pattern like this is key.  Ideally we want to see GDX hold support here and move sideways to slightly down.

Relative Strength RSI(14) has move to a reasonable 40 level right now.

Also key to note is that volume has contracted on this pullback to the neckline.

So again, we want to see GDX hold support here as a sign that the uptrend is still intact and we can start the next leg up.  Now what we want and what actually happens is a different matter.

Let us see how it holds up in the next few days.