This Simple Gold ETF (GLD) Chart May Prevent Much Headache

What is going on with gold? The world is in turmoil, but gold is going nowhere fast. Instead of trying to figure out how trouble in the Ukraine or Middle East will affect gold, take a look at one simple chart. It may just have the answers.

Every time there’s political unrest somewhere on planet earth, gold prices are supposed to go up.

Every time there’s deflation somewhere on planet earth, gold prices are supposed to go up.

Every time there’s inflation somewhere on planet earth, gold prices are supposed to go up.

Every time the stock market drops, gold prices are supposed to go up.

Every wedding in India or broken rice sack in China supposedly affects the price of gold.

It’s tiring to keep track of all the forces allegedly driving gold, especially when gold is obviously having a good time defying conventional Wall Street ‘wisdom.’

Instead of overanalyzing every global conflict, monetary or currency trends and wedding seasons in far of lands, it may be worth to simply watch one chart.

The SPDR Gold Trust ETF (NYSEArca: GLD) chart below is ‘dressed up’ with two simple lines.

Those two solid red lines form double trend line resistance right around 130.

My research suggests that GLD Gold ETF may test trend line resistance, but will not surpass it.

Trade towards 130 would be a low-risk opportunity to go short (stop-loss just above trend line resistance).

The actual gold price chart is even a bit clearer than the GLD chart. Continuous updates for gold are available via the Profit Radar Report.

The moral of the GLD chart story, is not to get caught up in all kinds of unpredictable fundamental cross currents.

For anyone who wants to get a headache, Goldschlaeger schnaps may be a more pleasant than following media predictions gone awry.

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

Short-Term Technical Analysis for Gold

Gold is at one of those potential key juncture where technical analysis can really enhance the message of investor sentiment. Excessive optimism suggests some trouble ahead. Technical analysis for gold can help pinpoint when.

On February 7 gold prices exceeded trend line resistance (dashed red line) that capped every prior breakout attempt.

The breakout is highlighted by the blue oval.

On February 9, the Profit Radar Report stated that: “Gold is chipping away at trend line resistance. The odds now favor a spike higher as long as there’s no close below 1,254. Key resistance and possible near-term target is at the descending trend line/trend channel resistance around 1,340.”

The February 17 Profit Radar Report refined the up side target: “Ultimately gold may move higher towards 1,360 or even 1,400.”

Gold is close to the up side target and the March 16 Profit Radar Report warned of excessive optimism, so there are a few things worth considering:

1) On March 14 gold closed at a new recovery high. This recovery high was confirmed by RSI (yellow line), which is generally considered bullish.

However, prior highs (August and October 2013) were also accompanied by a new RSI high and didn’t prevent further declines.

2) On March 17 gold touched the upper side of an ‘old’ trend channel and reversed (gray circle).

3) Tuesday’s decline triggered a ‘bullish percentR low-risk entry (pink circle). The initial drop of percentR below the 80 line (pink oval) is generally considered an opportunity to buy as long as trade doesn’t close below that day’s low (1,351). The corresponding ‘failure level’ for the SDPR Gold Shares (NYSEArca: GLD) is 130.33, for the iShares Gold Trust (NYSEArca: IAU) 13.11.

A close below 1,351 will be a failed bullish low-risk entry. Over the past year, every failed low-risk entry resulted in further losses.

It may be too early to bury this gold rally (there is still a possible higher target – see March 16 Profit Radar Report), but sentiment strongly suggests that the next bigger surprise will be to the down side.

Here is a piece of gold (and GLD, IAU) sentiment analysis that may surprise you and put a smirk on your face at the same time.

Gold Rally – New Bull Market or Bull Trap?

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

This Line is More Important for Gold Than the 200-day SMA

Back in December you couldn’t get investors to touch gold even with a 10-foot pole. From low to high, gold has rallied 13% since and analysts are starting to up their full-year targets. This could be a costly mistake.

About 50 days ago analysts gave gold a snowball’s chance in hades to move higher.

The December 2013 headlines below show that investors were as bearish about gold as they were bullish about the S&P 500 (NYSEArca: SPY).

Bloomberg: Gold’s drop to lowest since 2010 seen extending next year by Goldman Sachs
Forbes: Gold may be on verge of a waterfall-style decline
Wall Street Journal: Gold is testing last ditch support before it falls further into the abyss
Bloomberg: Gold trades below 1,200 as growth outlook curbs haven demand
Wall Street Journal: Gold’s glimmer gone, mutual funds feel the pinch

Those bearish headlines and other sentiment gauges contributed to this contrarian assessment by the December 29 Profit Radar Report: “Gold sentiment is very bearish (bullish for gold) and prices may bounce here.”

Up until February 11, gold’s rally attempts were feeble, with gains of less than 4% since the December 31 closing low at 1,204.

Gold broke free of its short-term technical shackles on February 12, when the Profit Radar Report noted: “Gold has broken above red trend line resistance (dashed red line), but has been held back so far by silver’s inability to move above 20.64. Odds favor higher gold prices as long as 1,254 holds.”

Silver confirmed gold’s move on February 14 (when it surpassed its prior highat 20.64), which helped gold jump above its 200-day SMA.

However, as the weekly long-term gold chart shows, there’s significant trend line resistance right around 1,335, which has kept a lid on gold’s rally.

The short-term daily gold chart illustrates additional short-term support/resistance levels. It also shows that RSI confirmed the recent rally high, which suggests new highs in the future.

However, any new highs could be short-lived. A thorough analysis of gold money flows – in particular Gold ETFs like the SPDR Gold Shares (NYSEArca: GLD) and iShares Gold Trust (NYSEArca: IAU) – strongly suggests that new lows for gold and silver are still ahead.

The article below reveals the reliable pattern that tends to accompany major gold bottoms. The Missing Tell-Tale Sign of a Lasting Gold Market Low

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

VIX Jumps Above 5-Year Old Trend Line Resistance

Investors have been complacent for most of 2013, but this changed quickly. A, thus far, fairly shallow 4% decline in the S&P 500 has investors scared enough to drive the VIX above a previously unconquered 5-year old resistance level.

Fear is back for the first time since June, when the S&P 500 (SNP: ^GSPC) dropped 127 points and the VIX soared as much as 78%.

This time around, the S&P 500 (NYSEArca: SPY) has only dropped 68 points, but the VIX (NYSEArca: VXX) is already up 63% (since September 19).

In other words, investors are more shaken up by the 68-point post September drop than the 127-point June drop. What does this mean?

There are two possible interpretations:

1) The VIX is already overbought and ripe to move lower or

2) As the chart below shows, the VIX just broke out above two trend lines, one going back to October 2011, the other going all the way back to October 2008.

The large grey oval shows what happened the last time the VIX broke above a similar trend line in May 2013.

The dotted red lines mark near-term resistance for the VIX.

Based on the May breakout pattern there is more up side for the VIX (NYSEArca: TVIX), but to unlock this up side potential the VIX needs to move above near-term resistance first.

Perhaps more insightful than the VIX chart at this point is VIX seasonality. The VIX is about to hit the most important turning point of the season.

VIX seasonality is discussed here: VIX Seasonality Near Best Turning Point of the Year

Simon Maierhofer is the publisher of the Profit Radar Report.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE Newsletter.

 

ETF SPY: Will XLK Ride Apple’s Coattail?

Apple has broken above resistance courtesy of a post-earnings gap up open. This is a bullish development, but caution is warranted as there’ve been at least 7 dead cat bounces in recent months.

The after hours reaction to Apple’s earnings announcement was positive. Shares were up nearly 5% as AAPL beat earnings and sold more iPhones than expected. The biggest fly in the ointment was that margins are shrinking, a problem all companies face when they ‘grow up.’

Apple accounts for 11.67% of the Nasdaq-100 (Nasdaq: QQQ) and 13.15% of the Technology Select Sector SPDR (NYSEArca: XLK).
Although Apple’s effect on the technology sector is not as suffocating as it was at $700 a share, AAPL is still the single biggest component of QQQ and XLK.
Interestingly, XLK has thus far been unable to beat its May high, but QQQ did. This lag is not due to Apple, as Apple rallied 11.8% from June 24 – July 17, XLK only 7.51%.
XLK Technical Picture
The stock market in general is kind of stuck between a rock and a hard place. A correction is due, but any dip is likely to be bought again. This means the up side is limited, but so is the down side.
The XLK chart below shows basic support and resistance (solid red and green line).
A close below the July 19 low at 31.37 would be a failed percentR low-risk entry, essentially a sell signal.
As long as prices stay above 31.37, the open chart gap (purple bar) should be filled. Even a move to the red trend line is possible.
AAPL Technical Analysis
If you want a shot of nostalgia, you’ll enjoy this article from August 22, 2012:
This article was written at a time when analysts were ‘bidding’ for the highest Apple price targets. Above 1,000 was pretty much the minimum bet.
Apple then dropped from 705 to 385 and has been bouncing aimlessly ever since.
Today AAPL was able to clear short-term resistance at 437. Next trend line resistance is at 448.
There have been many false fits and starts for Apple since the April low at 385 and there’s no telling if this bounce will stick. Similar breakaway gaps (gray circles) were retraced shortly thereafter, so it’s prudent to wait for more confirmation.
Simon Maierhofer is the publisher of the Profit Radar Report.
You can follow him on Twitter @ iSPYETF.

Will $100+ Oil Be a Problem for the Economy?

It’s summer and there’s usually a big buzz about gas and oil prices this time of the year. But there’s been little talk about oil’s quiet move above $100/barrel. In times past this has stifled the economy. What about this time?

“Higher Oil Prices Threaten Global Economy” – AP, March 10, 2011

This may be a headline of the distant past, but it was written at a time when crude oil traded just above $100/barrel. In fact, on March 10, 2011 crude oil ended the day at 102.58.

Oil above 100 usually captures the media’s attention one way or another. Some outlets consider it a sign of a strengthening economy, others a stone around the neck of car-driving consumers.

Interestingly, this time around, 105 oil hasn’t tickled the media’s reporting need yet.

Regardless of the media, there’s a worthwhile correlation between the S&P 500 and crude oil, and technical analysis suggests that crude oil prices are at an interesting junction.

The chart below plots the S&P 500 against crude oil prices and shows almost everything important there’s to know about oil right now:

  1. Crude oil prices just climbed above red trend line resistance (now support) at 104.
  2. Crude oil prices are also trading above longer-term dashed red trend line resistance at 96.
  3. Crude oil at 110 – 115 has coincided with stock corrections in 2011 and 2012.
  4. Important green trend line support is at 91.

Crude oil cycles don’t really support higher prices right now, but the chart shows very little bearish energy.

As long as crude oil remains above the solid red trend line, prices may reach the 110 – 115 danger zone that led to corrections in 2011 and 2012.

The dashed red and green trend lines will serve as important support in the weeks/months to come.

What About Oil and the Economy?

Oil is the only asset that keeps the Federal Reserve ‘honest.’ Past rounds of QE buoyed all asset classes. With the exception of oil, that’s exactly what Mr. Bernanke wants.

However, rising oil prices – unlike any other asset – are bad for the economy and may force the Fed to taper QE.

Oil is trading above various support levels and may continue higher, but oil’s quiet ascent has escaped the media’s attention. There’s currently no public pressure on Bernanke to curtail evil oil from pick pocketing American saving accounts.

After Many False Rallies, Did Apple Finally Bottom?

AAPL has delivered many fits and starts since last year’s all-time high, but every single one of them resulted in yet lower prices. For the fifth time in six months Apple shares are up more than 10%. Will this rally stick?

September 21, 2012: AAPL rallies to all-time high of 705.

April 14, 2013: AAPL falls as low as 385.

From high to low AAPL loses as much as 45%. During that time, AAPL rallies more than 10% four times. Since its April low, AAPL again is up 15%.

Is this rally here to stay or will Apple relapse again?

AAPL Seasonality

Apple has enjoyed a 10+ year bull market and the consistently rising prices are reflected in Apple’s seasonality chart.

Apple shares suffered larger drawdowns in May 2010 and May 2012, which contribute to the seasonal May/June lull expressed by the chart below.

Based on seasonality, May is not a great time to be long Apple in particular or stocks in general.

AAPL Technical Analysis

Apple’s ‘technical health’ appears better today than at any other time since last year’s high. This week’s rally pushed prices above double trend line resistance as well as the 20-and 50-day SMA’s. RSI is also at a 7-month high.

This is bullish price action, but there are two flies in the ointment:

1) Prices pushed above parallel channel resistance and the 20-and 50-day SMA just before embarking on the next leg down.

2) Apple seasonality is less than bullish for May/June.chart

Summary

Price broke above trend line resistance. Generally that’s bullish, but a previous breakout turned into a fake out.

We’ve been out of Apple for a while. The September 12, 2012 Profit Radar Report advised that: “Aggressive investors may short Apple (or buy puts or sell calls) above 700 or with a close below 660.”

Apple around 440 is certainly more attractive than AAPL around 700 and if Apple is on your stock ‘bucket list,’ now might be an opportune time to deploy some (not ‘all’ or ‘most’ of your) money. There was no bullish RSI divergence at the recent low. This cautions that the decline is not yet finished. The red trend lines should be used as a stop-loss level.

Russell 2000 and S&P MidCap 400 Butting Up Against Resistance

The Russell 2000 and MicCap 400 Indexes helped us identify weakness for stocks in early November. Now they’ve come back to touch major support/resistance levels and may be once again the “canary in the gold mine.”

About a month ago we looked at the Russell 2000 (small cap stocks) and S&P MidCap 400 (mid cap stocks) indexes to determine whether there’s more down side for the broader market.

Our focus was in particular on the trend line that connected the October 2011 low with all subsequent lows. It was a well-defined support level that created a pretty technical picture.

On November 7/8 the Russell 2000 (corresponding ETF: iShares Russell 2000 ETF – IWM) and S&P MidCap 400 Index (corresponding ETF: SPDR S&P MidCap 400 ETF – MDY) dropped below their respective trend lines.

This foreshadowed lower prices ahead and triggered a sell signal. However, the quick sell off left open chart gaps (particularly for the Nasdaq-100), that’s why the Profit Radar Report didn’t wholeheartedly embrace the post-election sell off and sold S&P 500 short positions at 1,348.

Fast-forward a couple of weeks and we see the MidCap 400 Index back above trend line resistance (previously support) and the Russell 2000 Index butting up against trend line resistance.

The first chart below provides a closer look at the Russell 2000 (support is colored green, resistance red). Right beyond the red trend line resistance is another resistance cluster made up of a descending trend line and previous highs/lows.

So there’s a strong resistance range ahead for the Russell 2000 (the same is true for the S&P 500) and it may take a couple of attempts to push beyond. The beginning of December tends to have a brief seasonal lull, which (combined with resistance) may drive the Russell 2000 (and stocks in general) a bit lower.

But small caps in particular sport a strong bullish seasonal bias starting in mid-December.

Mid caps have performed a bit better as they have already pushed above trend line resistance, now support. Nevertheless, resistance made up of prior failed highs is straight ahead.

The technical picture for mid caps looks more bullish than that of small caps, but even mid caps have room to retest the green support line before making another run higher.

Both indexes and their corresponding ETFs trade above their up sloping 200-day SMAs.

Simon Maierhofer shares his market analysis and points out high probability, low risk buy/sell recommendations via the Profit Radar Report. Click here for a free trial to Simon’s Profit Radar Report.