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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?