Gold (GLD) had a nice surge on the open this morning. In a webinar yesterday, we talked about the bull flag pattern. Today had a good initial surge but at the time of writing, no real change from the open. We really need to see some sharp follow through to the upside here. We can see on the SCTR that the price action has been trying to become top quartile for a sustained period which is one of the reasons I expect GLD to break above the 113.99 resistance.
Secondly, we can look at the ratio for miners to gold. It has been consolidating similar to the January 2015 runup. Now what we need to see is continued moves higher on the miners. This 200 DMA has been a ceiling on the ratio for over a year, so that will be an important test.
One thing on the chart that is not as bullish is the MACD. We can see it is already near the top of where it normally gets to. Trend changes are difficult as this whole pattern of the MACD is almost a photocopy of the January high. Keep watching for a bullish breakout on the ratio to hold the trade. More importantly, if this does not continue to improve, we might have seen the last stages of this 2-month rally. If the ratio breaks down instead of breaking to the upside, a defensive posture would be preferred.
Lastly, the miners chart. The miners are right at horizontal support. Watch closely to see if we can break through here. If we can, that probably marks a meaningful leg higher for GLD.
Join me for a no-cost Commodities Countdown webinar Thursday at 5 PM EST. Commodities Countdown Registration Link. I look forward to seeing you there.
Good trading,
Greg Schnell, CMT
