Gold Update 12/16/2010
Here's a brief gold update 12/16/2010 and analysis using GLD for readers of Online Stock Trading Guide.
For months now, and in particular over the lats few weeks, if you mentioned going short Gold (or GLD which I'll be mentioning in the rest of this article), the majority of responses you would have gotten would have been that you are either crazy or stupid, or both.
I know, because that's how I felt when I added a comment a few weeks ago among 40 or so other comments that were all bullish.
As you can see on the chart below, GLD has pulled back significantly on the last three moves higher, with each higher move increasing by a smaller amount than the previous move.
Not only that, just from looking at this 4 month chart, you can see that any easy money to be made on a move higher seems to have ended. The sideways, choppy price action definitely appears to be a sign of weakness in the uptrend that existed.
A few weeks back at the peak in early November, you can see that there was a divergence between the price action and both the RSI and the MACD indicators. As the price made a new high, the indicators did not, and in fact made lower highs at the same time.
A little over a week ago in early December, 2010, prices made a new high (slightly) followed by an immediate large red bar (down day), and have been weakening ever since. There has also been a second divergence now along with the new high.
A little different than in mid-November though, is that in November, the 50 day Moving Average held as a support level. Currently, prices are once again at the 50 Day Moving Average level and appear to be on the verge of breaking down through it.
During all this, everyone is still mentioning that Gold is going higher. It may be, but the story on the charts say otherwise. With the wide range days occurring over the last several weeks, the charts seem to have been telling the story for a while and nobody was paying attention.
The next follow up article on Gold can be found here: Gold Update 01/25/2011