GLD / DGLD Charts

This looks like exactly what I was looking for being gold has had a strong tendency to trade opposite the market, just look at today and being I only need something very short term that can not only hedge the trading portfolio shorts, but can also add a little extra $$$ to the portfolio as long as everything is timed right, this looks like it's going to be seat of your pants, precision flying to navigate this market the next day which is a Friday which means it's also going to be an op-ex day, which means look for the market to be pinned most of the day and then around 2 p.m. things will move a bit differently.

Because the DGLD volume is so low, the shorter timeframes have gaps in them where there's either no trade or 100 share lots and that doesn't make for a good signal, but I didn't come up with the idea using the DGLD charts, I was looking at GLD and GDX/NUGT/DUST, I decided GLD was more appropriate although I would have preferred the liquidity of a DUST over DGLD.

Quite a few of you asked me about GLD today and my response was the same all around, "I think it looks good, there's nice improvement in the charts, but I believe it's not quite done with this local base and today it popped just above that local base so I expect a little backing and filling". This last part makes perfect sense with the market signals being that gold has been trading nearly the mirror opposite of the market, GLD's charts also tend to confirm what I suspect about the market and any upside pop, SHORT DURATION, THUS THE OPTIONS TO MAKE THE PROFIT POTENTIAL WORTH WHILE.

 THIS IS THE HOURLY CHART OF GLD, which seems to be a forgotten asset and when they are quiet like this (much like home-builders during their massive base from 1999-2001) before they put in 2500%-5000% moves.

This is DGLD, it is effectively a 3x short GLD ETN. The spotty nature of the chart is a function of low volume. In red we have a strong bearish engulfing candle and a drop today just below the trendline, but on that drop the daily candle turns out to be pretty close to a bullish short term reversal, "Hammer", it's missing a little on the real body, but the principle is the same and closes right at the trendline

 GLD 30 min showing from left to right, a gap down on heavy volume indicative of a capitulation event, basically all the weak hand longs sold at the same time leaving only strong hands and giving smart money an opportunity to pick up a lot of shares on the cheap with plenty of supply so they don't drive price up or create any unwanted interest.

Then we have the little local base in between the trend lines and strong volume as we get a supportive move off the lower trendline. I didn't look close enough, but it may have triggered some stops as well. Today's move just above the base looks like a short term head fake, I have suspected all day that it will drop back down in to the range before making a serious move to the upside which the 60 min. chart is clearly telegraphing.

 This is GLD 15 min and it shows a counter trend correction to the left that saw distribution as price was higher than previous price above the trendline, but 3C was significantly lower, a distribution event.

As price makes its way lower which I talked about as being one of two very likely possibilities, either gold was ready to make a move higher or it was going to move all the way down toward the June/July lows and put in a much larger footprint/base.

At the time I said, "I don't care if gold makes a move higher here which is fine or if it moves to create that larger base because if it does create that larger base, it just means that when it moves up it will have the support and gas in the tank to make a significantly higher move than if it had moved up when I presented the two options.

 GLD 15 min above and 10 min just above both show an increasing positive ROC for 3C, this is seen on "W" bases or double bottoms as they mature as the second half is nearing completion so between the lack of interest, the size of base, the "off radar" nature of gold, it has all of the hallmarks of an asset under serious accumulation.

Also note the small head fake move below the local range just before it breaks out of that range today.

Even the 5 min chart is positive and looking stronger, this is fantastic because the 5 min chart could have easily gone negative today representing institutional distribution which would cause a rethink of the asset, but it didn't, it held its ground.

 Look at the same 5 min chart up close and what you see is an intraday "steering" divergence that sends gold lower on a gentle slope and in to the end of day Tuesday, as the market makes an end of day ramp that saw distribution, the asset that trades almost exactly opposite the market was seeing an end of day accumulation signal in a leading positive divegrence that played out today. What is good about today is once again, even on an intraday basis, GLD held in line and didn't show institutional distribution.

However, just like the intraday positives in the averages, the Index futures, some of the bellwether stocks like AAPL,GLD has an intraday negative. Again these intraday charts (1-3 minutes) are not serious divergences unless in a trend, they are more like short term signals and the short term signal was the opposite of the market which it should be for confirmation.

 This validates my thoughts today that GLD will likely come down in to the local range before popping higher on what I think is a mature divergence and a real, solid move.

The 2 min chart shows the same and fits perfectly with AAPL, PCLN, Index futures and market averages.

The 3 min chart shows accumulation at the EOD Tuesday, the opposite of the market averages which had ramped in to the close, but on distribution. ANOTHER PERFECT EXAMPLE OF HOW 3C SIGNALS PICK UP THE NEXT TRADING DAY RIGHT WHERE THEY LEFT OFF, EVEN ON THE START OF A NEW YEAR.

The take away is "very short term weakness, which would have been expected without the signals or the market signals, however we do have excellent confirmation".

So the 3x inverse (3x short GLD ETN), DGLD makes perfect sense as a short duration hedge, maybe a day, maybe two, maybe half a day, but it has the leverage I was looking for that AAPL couldn't provide (thus I opened a larger position to cover as a hedge).

DGLD looks to be a perfect solution to not only hedge the trading shorts, but to add some extra income in to the trading portfolio which closed out the day today at a +22.45% gain since inception which is just about 1 month as of today, that's an awesome return considering it's all equity positions and none of the leverage of options, If I were able to add options, this might be well over 50% for the month and that is solid performance.

Even though this is a new day, new year and volume is much different which can cause 3C some time to catch up to the new "normal", I REALLY like the visibility in the market and today's performance in the market is not typical at all, it's usually one of the most consistently bullish days of the year, not today, character is changing.