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Monday, April 15, 2013

GLD and GDX 4/15

Wow.  A lot of stops were run on gold Friday.  Check out the weekly GLD chart.

GLD broke the low of the very protracted trading.  Of course it is now extremely over sold.  The question now is was this just a stop running exercise to end the correction or was it a technical break down.  The crash in the mining stocks made me wonder if gold was making a top instead of basing to go higher.  I guess we will find out pretty soon now.  If GLD can reclaim the trading range then it was a stop running exercise.  Until it does that we have to live with the possibility this was a serious technical break down.  Lets take a look at the daily chart.

GLD stopped Friday at another potential support line.  Will that hold for a bounce?  I don't know what is going to happen here, but I think it is very important.  If gold has topped and broken down the most logical reason for that would be a deflation event is coming.  I know it is going to happen some day because it is the only way out of the debt mess we have in the world.  I don't know when.  During the deflation event we will see many sovereign defaults and it will not be good for stocks.  When people are scared they do not go out and buy stocks no matter what the dividend yield is.  At some point I would think GLD is likely to rally up and test that upper green line.  Getting back above it should be a positive.  A failed test and roll over would likely be very bad.  Lets take a look at GDX.

GDX has blue bars on the weekly chart just like GLD indicating it is below the lower Bollinger band and extended in price.  This looks like it should be a volume climax and a short term low could be at hand soon.  I don't see any need to rush in for long term positions.  GDX would need to do much repair work before it can sustain an uptrend.  GDX could still go considerably lower before the final bottom.  There is no way to know at this point.  There could be some good swing trades coming up though.


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