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Tuesday, June 25, 2013

GLD support lines

I hear some talk of gold being near a major low.  I don't know about that, but it could be near a trading low.  The one thing I do know is that it is in a bear market.  Lets look at the monthly chart.

GLD has gotten really, really over sold.  This is a possible support area marked by the dashed green lines.  That is from the minor peaks in the circled price area back in 2009-10.   That does not look like particularly strong support, but as over sold as GLD is a bounce is always possible.  The solid green line down around 99 is the best looking support area.  That comes from the 2008 top and price action in 2009.

GLD is well below its downward sloping 18 SMA.  Clearly GLD is in a bear market.  However, it is in an extreme over sold condition and there is potential support in this area.  A significant bounce seems possible. 

In June of 2012 in GDX revisited I wrote "It seems to me there are two distinct possibilities here.  This is either the buy of a lifetime in gold mining stocks or the price of gold is going to come down drastically."  We now know GDX was forecasting a big drop in gold prices.   I don't know what is going to happen to this long term.  It would be unusual to V bottom and start a new uptrend from this condition, but anything can happen.  The only thing I know for sure is that the uptrend is broken.  I would expect GLD will need to do some repair work before a sustainable uptrend can be established.  Until that repair work is done we can't possibly know if we have hit bottom yet.  We could be close to a trading bottom, but be careful about extrapolating that long term.


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