The Gold SPDR (GLD) is trying to stabilize with a small inverse head-and-shoulders pattern. Gold has been one of the weakest instruments in 2011. The chart below shows GLD peaking around 139 and moving below 129 last week for a ±7.1% decline. Even though the short-term trend is clearly down, bigger trends on the daily and weekly charts are up. This suggests that a short-term upside breakout would signal a continuation of a bigger uptrend. After surging last Friday, GLD consolidated to form a pennant or the right shoulder of an inverse head-and-shoulders pattern. A break above last week's high would reverse the short-term downtrend and put gold back on the bullish track. Support would then be set at 129.
Turning to the overall market, the short-term trend for SPY remains up. DIA, SPY and MDY moved to new highs early this week, but QQQQ and IWM fell short. While relative weakness in small-caps (IWM) and large techs (QQQQ) is a concern for the bulls, three of five charts are clearly in uptrends after new highs. SPY continues its string of higher highs and higher lows. The last reaction low was around 127.5, but I am going to combine it with the mid January reaction low to mark a support zone around 127-127.50. A break below this zone would clearly reverse the short-term uptrend.
Key Economic Reports:
Thu - Feb 03 - 08:30 - Jobless Claims
Thu - Feb 03 - 10:00 - Factory Orders
Thu - Feb 03 - 10:00 - ISM Services
Thu - Feb 03 - 12:30 – Bernanke Speaks
Fri - Feb 04 - 08:30 - Employment Report
Charts of Interest: Tuesday and Thursday in separate post.
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This commentary and charts-of-interest are designed to stimulate thinking. This analysis is not a recommendation to buy, sell, hold or sell short any security (stock ETF or otherwise). We all need to think for ourselves when it comes to trading our own accounts. First, it is the only way to really learn. Second, we are the only ones responsible for our decisions. Think of these charts as food for further analysis. Before making a trade, it is important to have a plan. Plan the trade and trade the plan. Among other things, this includes setting a trigger level, a target area and a stop-loss level. It is also important to plan for three possible price movements: advance, decline or sideways. Have a plan for all three scenarios BEFORE making the trade. Consider possible holding times. And finally, look at overall market conditions and sector/industry performance.
About the author:
Arthur Hill, CMT, is the Chief Technical Strategist at TrendInvestorPro.com. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London.
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