GLD concerns and opportunities

The short term picture of gold/GLD is a bit troublesome, the longer term view looks like an opportunity that only comes along a couple of times a year.

 The daily GLD chart-there was big volume on the recent breakdown and diminishing volume on the rally attempt. Also at the top red arrow, note the bearish shooting star candle which is often a reversal candle. The rule of thumb is that the upper wick should be about twice the size of the real body (the open/close). Further more the Shooting Star's body fell within the prior day's body which can be considered a Japanese Harami reversal or in western vernacular, an inside day (not text book, but close enough). In yellow we have a good example of a bullish Harami reversal or inside day with the second candle in the formation being a star right in the middle of the previous candle's body, this is often a bullish reversal as it was here.

 If you are using my Trend Chanel, a setting of 2 days has held multi-month swing moves, the current stop using the trend channel for these kinds of trades would be around the $145 area, perhaps a bit higher. I'd expect $145 to be an area packed with stops.

 The 150-day moving average has served GLD longs very well, but only offers an opportunity 3-4 times a year, this is where the highest probability/lowest risk trade is to be found, especially for those who are more comfortable with long term investing in gold.

 The 6-day Trend Channel has been about the equivalent of the 150 day moving average. Here you can see the long term trend has been intact since late 2008 without a single stop out. The current stop out area is around $140, another area I'd expect to see a lot of stops piled in. Because the 150 day moving average has been identified as a excellent place to add and because of the whole number stops within the area, I would allow a little more room as a head fake is highly likely on the next approach toward the 150 day average. If technical traders are watching this, you can be sure Wall Street is aware of it and will use it to sake them out.

 The daily 3C of GLD is showing a recent negative divergence on the bounce attempt, there have been no major top indications from the Sotch/RSI combo indicator, suggesting the trend is not over, but likely will see a pulback.

 The 15 min chart is a bit more complicated to read, for new members, green arrows=confirmation of the trend, 3C and price are making higher highs suggesting the trend is intact and healthy. Red arrows are negative divergences suggesting there will be a reversal to the downside and white arrows are positive divergences suggesting accumulation and an upside reversal. Currently we have a 15 min negative divergence and it is in this time frame in which divergences most often lead to a reversal.

 The 10 in chart has gone from confirmation to a negative divergence suggesting we will see a pullback in GLD, although this has very little to no effect on the larger trend discussed above.

The 1 min chart is also in a negative divergence. When we have confirmation on multiple timeframes of the same negative divergence, we are usually very close to a down side reversal. If you have questions, feel free to email me.