GLD Target Revision

For long term members, GLD/gold has been a fascinating ride, whether the bubble and the gold-bugs mentality in the face of objective evidence, the hedge fund manager who brushed me off when I warned him about Gold topping only to see gold top a month or so later, the whole QE-driven asset scheme and the gold/silver manipulation.

For those who haven't been around years, we were looking for a potential entry in to GLD as a long back in 2011 and instead we ended up calling a top and not only a top, but calling the Primary bear market gold would later enter.

Over the last year+ we have been looking at what we first thought was a counter trend move or a bear market rally, then it became more evident that we were looking at a base, but we still weren't sure how big it would be. Now it seems we have a significant base and Gold should enter a new bull market phase/primary trend.

As you know I've been looking for a deep pullback in GLD to complete the base and send GLD to mark-up, basically a trending position to the upside, but lately I've been studying the charts and think it's time to revise our base target which has implications for GDX/Gold miners as the correlation there is so close.

Here are the charts.

 This is the QE-Driven trend in gold as the fear of deflation is what drives gold prices, note I said the "Fear of deflation" and with the F_E_D dilluting the $USD, that's exactly what the fear was, you'll note some of the biggest gains on Gold were made during QE periods.

This is a 5-day chart so I could fit the trend on 1 chart and I'm using a 30-bar moving average, but it was the 150 day moving average that worked like clock-work from 2009-2010 and part of 2011, every time GLD pulled back to the 150 m.a.a it found magical support. We were looking for such a pullback when GLD made an odd, increased ROC in price to the upside, nearly parabolic at #4, as you know, "Changes in character lead to changes in trends"  and especially between stages, we tend to see a lot of changes in character like these parabolic moves that look very bullish, but are telling you, "Be careful, tighten your stops, a top is coming" and that's what we saw at 2011-2012 in the form of a large symmetrical triangle. This is when we backed out of any idea of a gold long and started looking for GLD shorts , we had a few very successful short term option trades during this period and then Gold did what we predicted when it was still in the top phase, it moved to a primary bear market as defined by trend, not the media.

Im 2013 we started to see a more bullish trend emerge.

This started off looking like it would be a counter trend rally within a downtrend or bear market, but it kept building a lateral base of immense size, this should make for a fantastic trending long position soon, but first we expected a move back down to the lower trendline, perhaps a head fake/stop run and then a new primary bull trend, however recent events and charts look like we need to revise our expectations for GLD.

 This is the 2-day 3C chart of GLD from distribution to increasing accumulation as the base develops, note where the divergences are...at the lows along the support trend line.

However recently I noticed the 4 hour chart looking very impressive, much more so than the pop to the upside we were expecting before a move to the low end of the base's range.

Here's a closer look at the 4 hour chart, no counter trend pop needs a 4 hour chart's positive leading divegrence, this looks like something bigger and looks like a classic bottom in the form of a "W", although it is within the larger base range, I just can't imagine this divergence giving way to lower prices other than a head fake move.

 The 2 hour chart shows the "W" as well and an increasingly strong leading positive divegrence where it is already very strong as seen on the multi-day chart above.

Finally even the 60 min chart is showing this area as looking like a base and why form a base here for a counter trend rally that doesn't need accumulation of this size? I suspect we are at an area that is about as low as gold will go on this base any way.

So, I'm revising my target from the $114.50 area to the $123 area which we are currently close to. I'd still be patient and let this finish and what I mean by finish is the support of the "W" is obvious, that means it's a likely head fake/shakeout target and that should be an excellent timing flag as to when we might want to start loading up the truck with long GLD trend or core positions.

The correlation with GDX is very tight and it looks like GDX already put in the lows of its base as well...

GLD daily chart (green) vs. GDX (red), that's a tight correlation and I suspect both are very close to very nice looking long positions, but  if you are interested in either asset as a long play, keep in mind this correlation for diversification. I'm not a fan of over diversification, but in this case I think the two positions should almost be treated as one as far as position sizing goes as they are so similar.

We'll track the specifics re: and entry next week, but for now I think changing the base/bottom expectations is a very significant change to our expectations , how and when we trade GLD or GDX.