GLD Trade Set-Up

We use to have quite a few gold trades, but recently it has been a jumbled mess. I've probably captured half a dozen charts once a week or so getting ready for a GLD post only to find something that was standing out like a sore thumb that argued against probabilities. Our goal is not to figure out what the most likely probability is, it's to find the highest probability/lowest risk trades.  This isn't a A or B exercise in which you have to choose long or short, there's a bis every 30 mins and if one asset is not giving you high probabilities you move to the next and if need be, sit on your hands until one is jumping off the page.

I wouldn't say gold is jumping off the chart right now, but the Index futures have shown a lot of improvement and I can envision a scenario in which gold sets up for a strong trade, that being said, as always, every expectation we have must be confirmed with objective data.

 Many of you may remember when we called a top in gold in 2011. We used multiple timeframes, numerous concepts, but called the top nearly perfectly at the red arrow. This daily 3C chart of GLD shows an uptrend that had near perfect confirmation and at this point the negative divergence at the 2012 top doesn't jump off the page, although it's there, most of the evidence was on shorter intraday charts like 60 min, etc. However to the far right you can see one of the first divergences that does stand out from the 3C/price trend confirmation.

 The multi-hour (6h) chart shows recent improvement in GLD, although the price structure itself doesn't look like a typical bottom and I believe that is because it's not, at least not yet.

 This 30 min chart doesn't have a great/standout divergence to the far right, but it is leading and there's a lower support level we are coming up on where improvement in both GLD and gold futures charts is starting to be seen.

If you haven't caught my drift already, I suspect there's a large double bottom starting to form in the area, the first bottom being off to the left.

In most cases with a double bottom, the second bottom will put in a head fake/shakeout deeper low which runs stops-the opposite of what Technical Analysis textbooks have taught for decades.

 This 15 min chart makes the local price action's divergence a bit more clear and understandable, but it will have to move to longer charts like the one above this and do so in a clean manner.

 This 5 min chart is leading positive and it looks good, but just a quick look at price action alone and you can see the reversal process isn't mature, it has started and it has the right divergence, but it looks to have more to go which is why I find it interesting that it appears to be about as far as VIX futures and probably the major market averages are from their pivots.

 The 3 min chart is showing recent improvement is what appears to be rotation between equities and gold as does the 1 min chart below.

GLD 1 min.

My guess is that GLD will be at or very close to an upside pivot near the end of the week as equities move closer to a downside picot. This is my guess which includes a double bottom which we are essentially at, a small head fake/stop run would complete that aspect. I don't want to put trade ideas out there on best guesses , so I'm telling you what I expect to see which is a double bottom and likely stop run below the $109.65 level. If we can get that kind of a move with confirmation of accumulation of stops that are hit, I'd feel a lot better about a long gold position and the wild chop would start to make a lot more sense with a considerable base which I'd estimate to be worth approx. a move to $124 + or so.