Gold ETF - tag category postings

The gold price continues to play head games and drift along on what almost seems like holiday type volume levels.  We just are not seeing a decisive move yet in either direction and the GLD ETF is doing a good job of testing trader’s patience and willingness to stick around for the directional change.  From a sentiment perspective Mark Hulbert says that his HGNSI sentiment index shows gloomy sentiment among gold newsletters:

Consider the Hulbert Gold Newsletter Sentiment Index (HGNSI), which reflects the average recommended gold market exposure among a subset of short-term gold timing newsletters tracked by the Hulbert Financial Digest. The HGNSI’s latest reading is minus 16.5%, which means that the editor of the average gold timing newsletter is recommending that his subscribers allocate 16.5% of their gold portfolios to shorting the market. Three weeks ago, in contrast, the HGNSI stood at 60.9%. So in just 15 trading sessions, the average recommended gold market exposure has fallen by more than 77 percentage points.

I never was a huge fan of this type of sentiment index but we can just take it for what it is at this point. It is interesting to see these types of sentiment numbers when we see the gold price only roughly 10% from its all time highs.  If you think about it that is a pretty amazing stat.  Perhaps the speed of the recent correction in the gold price is what moved so many to the other side of the fence. Perhaps also it has to do with this general idea that the gold price has made a double top?  Certainly the recent persistent rally in the broad market also contributes a little to the negative sentiment of the gold market.

Either way, at least for now I still do not see the gold price showing it’s hand. All things considered the gold price has held up remarkably well in the fact of the recent super spike rally in the broad market… so far anyway.  We could easily be up another 600, 700 points in the Dow tomorrow and so one does wonder how much longer the gold price can deploy its defense shields (been watching too much star trek lately ).

Looking carefully at the little chart to the left we do see what looks like a possible symmetrical triangle developing.  It says that a big move is coming, but again in which direction?  Usually symmetrical triangles are continuation patterns so that would argue a continued move downward perhaps to 85 level.  Symmetrical triangles are also very tricky patterns because they are also equally famous for having false breakouts (shakeouts), returning back to the apex of the triangle and then resuming higher into the previous trend.  If we do get a break down in the GLD ETF but then a return back up to the apex of the triangle and subsequent move higher, then we would have what is known as a ‘busted pattern’ which could have quite bullish implications.

But again the story for now is the low VOLUME and drifting in the gold price as it seeks to find direction.

As I mentioned before, I have been running with the theory that the current correction and consolidation in the gold price would be fairly quick and dirty and then resume the uptrend again for the simple reason that there really is not that much price resistance on the left side of the chart (from the 900 level to the 1000 level). It remains to be seen if I am correct on that point.

It is also once again worth mentioning that the US dollar index is starting to break down badly.  It looks like a double top and I see that the dollar index has made a marginal new high a few weeks ago but then broken down back inside the trading range which has the potential to be very bearish.  If we start seeing a collapse in the dollar similar to what happened in the December 2008 time period, then it is hard to believe that the gold price would do nothing short of skyrocket upwards.

So we still have a few mixed signals. Lets see how it all shakes out. We should know by the end of this week.

It was a quiet day today in the Gold Market.  The gold price as represented by the GLD ETF did not manage to make much of any statement today.  Indeed the volume was also very light and similar to last Friday’s light volume.

Now here is the dilemma. Are we going to break down or break out in Gold ?  The key for me anyway is the March 6th swing high of 92.95.  We need to get over there with some conviction.  So the question is how soon can such a thing occur if at all?  Right now it may be too tough to call.  I think we will see a big move coming out of this recent 2 week consolidation but for me it is too early to say it will be to the upside.

There are a few different crosscurrents right now.  For starters I could make the interpretation that this declining volume is a bullish development, especially the speed with which it has declined.  One could make the interpretation that the especially light volume today is an indication of last remaining sellers being squeezed out.

Then we also have what looks to be a possible 3 rising valleys pattern as shown on the chart to the left (drawn in red).  Now the 3rd valley seems to be forming now and the whole pattern would be confirmed on a breakout with confirmed volume above the peak of the 3rd valley.

This last valley that has formed is also characteristic of a final small handle of sellers from the original old high of March 17th, 2008.  Certainly it was to be expected that we get some sort of residual selling from left over sellers in that area.  Again, the declining volume trend on this handles formation is quite bullish.  I have seen handles like this in the past that also had such a dramatic drop in volume initiate a breakout with high volume seemingly out of nowhere.

Also bullish at the moment is that we continue to trade and hold above the 50 day simple moving average.  The 50 day moving average remains in a bullish stance above the 200 day moving average.  We are also holding support of 900 in the price of gold so far at least.  The low volume characteristic we have seen in recent days seems to suggest we will continue to hold this 900 support.

If we are able to get some upside tomorrow it would certainly be interesting to see what happens to price on a move above the March 6th swing high. It may trigger a short covering panic and cause a quick acceleration in price.

Downside possibilities could be the 85 area on the GLD or near the 200 day moving average.

So for now we will just have to wait and see what the gold price tells us.  I have to say my bias is to the upside, but do not have enough conviction yet based on this setup.  It is also worth noting that the next upwards advance in the price of gold is likely to take out the all time highs.  I do not see another consolidation at the 1030 level again.  It is time for gold to face the music.  It has been given 3 chances now to overtake this all time high, and I would say now is about the best chance it has as any.  Assuming a move into the all time high, there should be significant follow through buying just based on that technical event alone.

One last point that is interesting, tomorrow is March 17th, 2009.  That is exactly one full year from the previous exact peak that occurred in the gold price on March 17th, 2008. Significance? Don’t know, we shall find out tomorrow…

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The GLD ETF is once again at a crucial juncture.  I have to say right off the bat that I believe the GLD is behaving extremely well. I mean how many other sectors do you know of right now out there in this market that are behaving ‘technically well’ ?  There just are not that many to be seen.

GLD is holding supports properly and also has respectable advancing volume versus declining volume relationships that are second to none.  In addition today we bounced (so far anyway 1PM eastern time) back up above the 50 day simple moving average.  The 50 day is currently above the 200 day as well having previously achieved a golden cross (50 day moving average crossing above 200 day moving average) a few weeks ago.

Now if all that bullish information was not enough for you hold onto your seats because I have even more… I have noticed that the GLD ETF has a ‘three rising valleys’ trading pattern.  I have drawn up a chart below and labeled the three valleys 1,2 and 3.  This is a pretty reliable pattern and it has measurement implications for the GLD to about 120.  Just looking at that pattern you get this sense that the price of gold is trying to get a running jump start (like a pole vault champion) to achieve its breakout of the all time high.

The 100 level is a KEY level as I write on the chart to the left because it represents not only the all time previous high (or very close to it at least) but it also represents the activation level of this pattern to make it valid. If we take out the high at 100 then it is saying we should have a really substantial move that makes new all time highs. Why? Because in order to make a breakout of this magnitude valid we need to see a very substantial sign of strength with enough price bar spread and volume to confirm it, otherwise it would be invalid.

The nature of this most recent correction in the GLD has been fascinating.  It has so far been very fast and sharp.  But lets think about this for a second, imagine you are the price of gold and you want to try to trick as many people as possible. How are you going to do it?  Well certainly right near an old all time high you would do a very brutal and fast price correction that scares a lot of people out of the market. Secondly, you would then probably recover back up to the old all time high almost as fast as you went down, and then third you would break out even faster than that so no one has a chance to get on board! Brilliant!

It just seems that it is the nature of the gold market to trick people as much as possible. It is like a bucking bronco trying to shake as many people off before the real move gets going.

One last point that I have been thinking about as well that makes the above scenario legit is that we have less and less resistance on the left side of the chart.  What that means in plain English is that the gold price should be able to move faster and complete corrections faster than it normally would. Make sense?

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.

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.