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Wednesday, March 19, 2014

GLD and GDX 3/19

I want to start with the monthly GLD chart.

The double bottom came in the area of the late 2009 monthly close.  That was a spike up price bar that preceded a pullback.  Old resistance became support.  The current rally has picked up a lot of believers that gold has bottomed.  Maybe it has, but it certainly has not done enough to prove that.  I would say GLD needs to get above the 8/2013 high of 137.55 before we can say it is likely reversing the down trend.  It had a whale of a crash.  The first bottom attempt is often not the final low.  There is a much better looking potential support area at the next green line.  I think it is still possible we get there eventually.  Lets zoom in to the daily chart.

I have tried to outline this move up with a trend channel.  Today's move down has gotten GLD down to the lower line.  I think this is a decision area whether to continue the rally or not.  Some kind of bounce seems likely here.  Whether that restarts the rally or ends up rolling over and breaking the line I do not know.  Getting back above the 18 SMA might get the rally restarted again.  I will be watching this for a long entry tomorrow.  A gap down that reverses might provide a good entry.  A gap up would be more difficult without a retest of the low.  While we are at it lets look at the GDX chart.

GDX is a little further below its channel line.  However, the same situation applies.  This is a decision area.  This one is a lot closer to the 200 SMA then GLD is.  Maybe that acts as a magnet I don't know.
They both have to reverse though before the rally can restart.

There is plenty more room overhead for both of these ETFs to bounce and still not decide about the long term.  However, they have worked off enough of the over sold condition that this may be all there is.  I view them as swing trades only.  I think the longer term picture needs to clear up before any long term holds are appropriate.  The risk of more down side is still pretty significant.


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