I have been questioning for sometime whether gold is in a bubble, if I were to post that remark in certain forums I'd be strung up by my thumbs. Gold has a loyal following, more so then any other asset I've ever seen, which could also be the followers Achilles' Heel. One of the ways I judge bubbles other then technically, is when the layman all of the sudden becomes an expert on Gold, when people arrive early at garage sales to try to scoop up any gold jewelry and when a certain circle of people I know become deeply involved, it's usually right at the tail end of a bubble. That's my gut, here are the charts from micro to macro.
Gold did very well under the inflationary and dollar deflationary QE regime and for a brief time when the market collapsed, it looked like it would be a safe haven trade, but it has vacillated so much between the two it's hard to make out what the rules are. With recent data from China, we may very well be entering a deflationary cycle (and the rest of the world isn't helping much there). QE options are becoming more limited every week it seems.
GLD found support at the red trendline, I even posted in an update it was likely to bounce from there as it did, but the rally has been on very low volume.
Large volume spikes near support areas are often reversals to the upside, a sort of mini-capitulation and we see that 2x here, but the cumulative volume indicator also shows how soft the volume has been on the bounce (in red).
3C 1 min is literally running the other way in a leading negative divergence.
Here's a zoomed close up of the 1 min chart, it seems this morning's parabolic spike may have been a last gasp of sorts and 3C was negative there.
The 2 min hart looks just as bad and confirms the 1 min readings.
And speaking of running the other way-look at the 5 min chart recently. That's a lot of confirmation on this bounce.
The 10 min chart unfortunately isn't available on StockFinder so it has limited history, I can't place it' long term relative position, but I can see a negative divergence very clearly.
The hourly chart is the one that really seals the deal and why I will NOT buy gold long, not even for a bounce play. I may consider it a short under the right conditions.
The volume and parabolic nature of the recent spike is a change in character and these often precede reversals.
Long term MoneyStream is very negative on GLD and calling massive distribution at what appears to me to be a top.
3C which was confirming the uptrend with higher highs (green) is now nearly as negative as MoneyStream. These two indicators do the same thing, but they are not coded the same, they are very different, so to see each giving the same signal tends to carry a lot of weight with me.
Finally, the long term buy area of the 150 day moving average has not acted like it has in the past. As a matter of fact, the moving average seems to be the support line of a triangle top that is forming, the volume is correct for such a top. I would consider GLD a short either on a false breakout of the triangle to the upside or upon a break down from the triangle in which I would add a partial position most likely, wait for an upside correction and add the rest of the position.
Looking at everything, I would say that the chances of gold topping are fairly good, even if it is not a huge secular top, I would rather bet on downside then upside at this point.
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