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Wednesday, July 9, 2014

GLD and GDX 7/9

Last month brought quite a move up in the precious metals complex.  Lets take a look at the GLD monthly chart.

The 18 SMA is just above at 129.44 and could provide resistance.  On the flip side the price bar turned green last month for the first time since the crash.  It might be a change of character, but it also means GLD has traded sideways long enough to burn off the oversold condition.  Check out this chart of COT data.

The author seems to think hedge funds are dumb money.  I am not sure I agree with that statement.  They can be smart or dumb at different times and on different asset classes.  However, it is clear they are piling into the gold market.  In this particular case are they smart or dumb?

GLD has been trading sideways for a year after its big crash.  I think we are getting very near the point where it will decide whether break out on the upside or make another leg down.  The COT data is high enough now that should it turn down again it seems likely to make new lows.  With price approaching the monthly 18 SMA it is getting into an area where bears could strike again.  Here is a look at the GDX chart.

GDX topped out and led GLD down.  Will it bottom and lead it back up?  There is a potential inverse head and shoulders pattern developing, but it has not completed yet.  There certainly is a lot of volume over the last year.  This has good potential for a bottom, but until it actually breaks out on the upside anything can happen.

These charts are getting interesting, but they are not committed one way or the other yet that I can see.  The power seems to be up for grabs here.  Which side will reach out and take it?


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.