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In many instances, gaps in the Gold ETF (GLD) and 20+ Year T-Bond ETF (TLT) are reactions to trading on other exchanges. These ETFs based on instruments that start trading well before US stock exchanges open. GLD is based on gold and TLT is based on bonds. Along with currencies and S&P 500 futures, these two markets are truly global. Trading starts in Asia with Japan, Australia and Singapore as dominant players. While Americans are enjoying evening activities, traders in Asia are getting ready for the markets to open. Trading then works its way west with Europe providing the next big activity spot. London, Frankfurt, Amsterdam and Paris open for trading while (most) Americans are sleeping. Trading in gold and US bonds is already well underway in two thirds of the world by the time the American exchanges open. Treasury Bond futures start trading on the CME at 7:20AM and gold futures start trading at 8:20 ET. Finally, the NYSE and the Nasdaq start trading at 9:30AM. In addition to Asia and Europe, the ETFs must also incorporate the price action that has already taken place on the CME. In many instances, prices have already moved these two ETFs are simple reacting to these movements. This means we cannot take gaps too seriously when analyzing these ETFs. In addition, these preordained gaps make candlestick analysis a bit more challenging because the open is a big part of candlestick methodology.
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