GLD/GDX Update

Last week was a tough decision on the GLD/GDX options, in fact Friday's update for GLD started like this...

"I would prefer to either see GLD ( gold) get on with a pullback/gap fill or really tell us something is wrong as it is a QE asset rather than sit idly and chew up theta."

It's not like I didn't know or think there was going to be a likely pullback, as a matter of fact, Thursday's update showed this GDX chart with the following comments...

"Short term positive divegrence in GDX yesterday and the pop today, I'm a little uncomfortable with the support for this particular move."

Basically as I made the decision to hold both options, my expectation was that the gap in GLD would be filled, GDX didn't have the same gap issue so it was more of just a pullback, however since there were stronger charts in longer timeframes, my feeling was a gap fill pullback was probable and that's probably it, although with GLD, there's the possibility of pulling back a bit deeper which would just create a stronger, larger base which would ultimately benefit GLD and my thoughts were/are December expiration is enough time to take advantage of the expected move after a pullback.

Today we have that clear pullback, for GLD it's the gap fill expected Friday.

 Daily GLD chart and the gap at the yellow box, the gap is filled today so what I start looking for is whether there's accumulation as that gap is filled or whether it waits in which case a larger base would be the probability which I'll show you.

GDX didn't have the same kind of gap issue so a pullback with GLD is likely and what we have. So far there's some support, but I don't EXPECT anything to just make a "U" turn or a "V" turn and head right back up, even here the reversal process applies, although the scale is much smaller/shorter.

If GLD was going for the larger base which would benefit an uptrend as it would have a larger base to support it...

GLD 2 hour, the white trendline is where the larger foot print/base would be if GLD pulled back more beyond just the gap gill.

As I said last week (Friday) it was a decision to hold as I knew it was high probability GLD fills the gap, it's high probability that almost all gaps are filled now (it didn't use to be so).

The GLD 5 min as of the close Friday and why I thought a pullback (gap fill) was high probability.

 GLD 5 min as of the close Friday

And the reason I figured it's higher probability that this gap fill/pullback ends up being constructive and GLD benefits on the upside with December expiration calls having enough time...

15 min GLD not only seeing price flatten out (the downside ROC diminish to a lateral trend), but the 15 min leading positive divegrence which is significantly stronger than the 5 min chart above.

So that was the calculated assessment.

So now it's about watching to see if the positive divergences develop, they are usually not right off the bat because it doesn't profit anyone to accumulate at a higher price when they know they'll be able to get it at a lower price if they just wait a bit.

 GLD 1 min is seeing some action, I'm not thrilled or overly excited yet, but GDX is actually looking better than I'd expect at this point...

GDX (Gold Miners)

 The intraday 1 min and you can see the reason I felt a pullback was likely to the far left, but thus far it's looking pretty good today on the pullback.

Pullbacks are fine, in fact usually healthy as long as we see accumulation in to them and know someone is buying the pullback in size.

 THIS 3 MIN CHART IS ACTUALLY THE EXACT CHART I USED TO SHOW THE HIGH PROBABILITY OF A PULLBACK AND THE 5 MIN BELOW THAT THE PULLBACK WOULD BE "CONSTRUCTIVE".

So far so good on the 3 min, also leading positive in to the pullback.

 This is what the GDX 5 min chart looked like last week and why I suspected between the GLD 15 and GDX 5 min that a pullback would not be a horrible event and decided to stick with the options after MUCH deliberation and more than a half dozen posts.

NUGT 3x long GDX I show this for confirmation of GDX's signals.

3 min shows the probability last week of the pullback and thus far it's reacting very well so I'm pleased with that. I also have a core NUGT position not for trading and I easily decided to leave that open.

DUST 3x short GDX I'm using this too for confirmation, it should have the exact opposite signals of GDX and NUGT.

 Intraday 1 min on the move up (as GDX/NUGT pullback) is seeing a negative divegrence so that's good.

The 3 min chart shows the confirmation with a positive divegrence of the probability of a GDX/NUGT pullback, however again, the 3 min chart's response since the move looks good, leading negative.

So GDX, NUGT and DUST are all confirming and so far almost EXACTLY what was expected last week/Friday. So far GLD is lagging a little more than I'd like vs. GDX, but I doubt that will last for long, so, so far so good.

I'll try to keep on top of these so if anyone is interested in going long GDX, NUGT of GLD on a pullback that is healthy, you'll know when the timing looks best.