After some unbelievably choppy action on the GLD over the past few days, we happened to come across what looks to be a diamond formation on a three month chart:



Following the sharp selloff that occurred from the high set in February, we should technically see a subsequent sharp rise in price from the current levels. This theory would seem to be further supported by the buying volume on the GLD. However, we would really like to see the GLD trading above the 50-day in order to confirm a move higher, because based on price alone, this chart is starting to look a bit weak. In any case, we should see a strong move in either direction over the coming weeks.

Good luck.

We began to see some signs of what might be an impending selloff going into next week. Volume was fairly light last Friday, so for any confirmation of a change in trend, we definitely need to see an increase in volume:



The trendline that has been in place for the past few weeks looks to be showing signs of a breakdown on the hourly. The tests of that trendline have become more frequent, and are already below the 50-day, both somewhat bearish indicators. 820 looks to be a fairly signifigant area of resistance, while a break of support at 800 could lead us to a fairly bigger selloff. That’s what we’ll be watching next week.



It looked as though we had an ascending triangle forming on the XLF last week. However, that too looks to be breaking down. Watch for support at $8.60. A break of that level could lead the market lower.



The GLD has been consolidating nicely around $90. We’ll be watching for a breakout above $92 on good volume to confirm a move higher, as well as the formation of that right shoulder that we mentioned a few posts back.

And in case anyone missed it, here is Gordon Brown, Britain’s Prime Minister, getting blasted by Daniel Hannan for his handling of England’s economic crisis:



He couldn’t have said it any better could he?

Good luck.

Today caught us somewhat off-guard. We, like many other traders, were coming into the morning expecting a continuation of the selloff that began last Thursday:



The market actually managed to push through the 50-day moving average, not to mention that 800 level, which had been acting as heavy resistance for a few weeks now. We mentioned in the last post that we wanted to see some sort of volume confirmation in the selloff that we were initially expecting today, and we instead got the exact opposite: a rally on slightly heavier volume. So the selloff that we saw Thursday and Friday could be looked at as a bull flag after todays trading. We have resistance at 824 and 850 on the way up now, with 800 now acting as support.

Simply put, today’s action was fairly bullish. Regardless of whether or not this plan will actually work, we finally have some clarity as to what the Federal Reserve plans on doing in the coming months. This alone could produce another sizeable leg up in this bear market rally. But only time will tell if this plan actually works. If history is any indicator, the government will likely blow this just like they blew that other $700 billion. Guilty ‘till proven innocent in our view.

Good luck.

Well after a somewhat extended vacation, we are back at it again. Let’s take a look at the market:



The S&P made a run at 800 last week and was rejected by the 50-day moving average. Getting short at the 50-day has been a great trade over the past few months and it looks as though that will continue into the remainder of the year. Also, volume was somewhat light last week, so we’d like to see an increase in volume to confirm the trend change to the downside.



Looking at an hourly chart of the S&P, we definitely put in a double top at 800. From there, we broke trend-line support and managed to put in a lower high. The selling should continue Monday unless something crazy happens. We’ll be watching that 760 area for a break of support.



With regards to Gold, any regular readers of this blog will know that we love this chart from a technical perspective and even more so from a fundamental perspective. To provide greater support to mortgage lending and housing markets, the Federal Reserve announced last week that it will be increasing its balance sheet by purchasing an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year. Also, to help improve conditions in private credit markets, the Federal Reserve will purchase up to $300 billion of longer-term Treasury securities over the next six months.

In other words, the Federal Reserve is going to printing a lot of money over the next few months and Gold is looking like a better and better place to put money these days.



Here is a yearly chart of the GLD showing that inverse head and shoulders we mentioned a few months ago. Obviously that right shoulder still needs to form, but last week was a good start.



The financials actually managed to break through that downtrend that had been intact since October of last year only to be rejected at the 50-day. A break below $8 could lead us to a retest of the lows at $5.88.



Oil is beginning to show some signs of life as the USO actually pushed through the 50-day last week. If we break above $40, we’ll be taking a shot on the long side. Otherwise, we’ll be trading other charts.

Anyways, it’s good to be back.

Good luck.

We will be taking the rest of this week off. Look for normal posting to resume next Monday.

It would be funny if it wasn’t true.

We said that the GLD was starting to look interesting around $88 and we’re finally catching some buyers today:



That GLD downtrend that had been in place since Monday of last week was broken on some heavy volume today. Let’s see if it can hold into the remainder of the week.

Well, Japan certainly has, but it seems as though we need to read up on our history a bit.

Gold has seen some fairly heavy selling over the past few days, but we could be reaching levels where buyers may be willing step back in:



We’re watching that $88 level on the GLD as an area of potential support, as well as an area to start some new long positions. There is double support here from the trend-line dating back to October, as well as that 50-day moving average. Let’s see what happens later this week.

Good luck.

What a crazy last hour of trading we had last Friday. It almost looked as though we might close above 739, but it wasn’t to be as news of the government stake in Citigroup, as well as dividend cut for General Electric, was enough for traders to send the S&P to new lows not seen since 2003:



There is not really much that can be said here. New lows will lead to much more pain throughout the course of the year. Anyone that tells you otherwise is simply wrong.



With the S&P breaking to new lows, this has forced us to re-evaluate our outlook a bit on Gold. We mentioned the possibility of an inverse head and shoulders on the GLD chart a few posts back and we were hoping to maybe get a bit of consolidation on Gold before moving higher. However, after looking at a monthly chart of the GLD, we happened to notice what might be a massive bull flag in the works. Technically, this would seemingly lead to a monstrous breakout of Gold. The volume seems to confirm theory. We’ll see what happens next week, but this is definitely something to keep an eye on as the fear comes back into this market.



The VIX also appears to be in the process of forming a bull flag here. Lower lows on the S&P should cause an increase in volatility, so keep an eye on this chart for a breakout to the upside.



The downtrend in the financials continues to remain intact. Keep an eye on that trendline as a place to start new short positions.

Let’s see what happens this week.