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SPDR Gold Trust GLD ETF Looks Ready for a Big Move

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The SPDR Gold Trust GLD ETF looks like it is just about ready for another big move.  Some time ago I did a post on why I thought it was prudent to be cautious on gold because there was at least the potential of a bearish weekly divergence developing.

That bearish divergence has failed to play out.  And now the gold market finds itself in a position where the daily MACD is just about to turn bullish and the gold price is compressed into an ascending triangle.  In addition the weekly chart and the monthly chart still look bullish. 

So I have to tip my hat to the bulls here.  The monthly RSI is right into the powerzone and has plenty of room for upside expansion.

As long as the GLD maintains the current supporting ascending triangle structure I think you have to be open to huge upside moves.

If we see any closing prices below 120 in the week ahead then it would change the near term very bullish outlook and could completely reverse my opinion.  But for now I have to say the GLD has everything going for it to the upside and actually an entry right near these levels with a protective stop at 119 seems like an outstanding risk/reward.

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A lot can happen in 8 Trading Days

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My impression of today’s trading action is more of the same.  We are rallying on fumes (lighter and lighter volume) and it is an urgent warning to me that the market can retrace the rally that began on June 8, 2010 very quickly.  I still doubt that the next leg of the decline will start this week, but I suppose one could say that the heavy volume of options expiration this Friday could lead to unpredictable price action.  My take is that we somehow manage to stay afloat the next two trading days and maybe even blast up in one last ‘hurrah’ to close this week strongly higher.  But then next week ought to start down very hard and be relentless if my accelerated bear scenario is to stay in force.

A lot of price action (or price destruction) can take place in just 8 trading days leading up to the June 28th target date.  It seems too convenient that so many have forgotten the 1000 point 1 hour plunge that occurred in May.  I guess I cannot blame anyone as I cannot remember what I had for dinner last Friday either.  But my point is that this market can once again surprise with a speed that is unthinkable to even the most bearish of bears. 

If the June 17 to 25th, 2010 astro aspects are to have any real credibility then this market should start to show us something dramatic sometime next week and into the 28th. 

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The Market Could Initiate a Total Collapse at any Time

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The words that make up the title of this post are not mine.  They are Larry Pesavento’s words and I happen to agree with him.  I continue to believe that this is an extremely dangerous market and that it is an environment of a weak and nervous bid.  We literally could start to collapse at any time.  We were able to drop almost 1000 points in a handful of minutes on May 6, 2010.  Dropping 2000 points in double that time does not seem impossible either.  This market is building a catapult or a spring board for the next big move.

I have spent a good amount of time over the weekend contemplating the bearish and bullish sides of the market and so I am just going to write out a potpourri of thoughts in the paragraphs ahead  and also comment on today’s closing price action.

Why Should the sp500 go to 1150?

I think it is an important question.  It seems like every technician in the world expects the market to zoom to 1150 to create a right shoulder of a larger head and shoulders topping pattern.  I admit I have considered this possibility and wrote about how I was expecting that as well after the reversal of a week ago.

But after some contemplation I am starting to think this is much less of a possibility and that the advance that started a week ago may have either topped out today or by the middle of this week. 

Why?

The sp500 going to 1150 or 1170 would make it much too easy for those who are currently trapped to recoup a large portion of their losses.  Since when is the market Mr. Santa Clause giving previously greedy bulls all kinds of second and third chances to bail out break even ?  It does not make any sense for this market to do that if it is in a persistently impulsive bearish trend as I predict it is.

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The Tape action was VERY UGLY today

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This may be the most significant post I have done in a long time here at BestOnlineTrades.  I can smell a big drop coming, I can taste it, see it and feel it in my bones.  This is how the trading dynamic is setup up right now.  Let’s not forget how the first flash crash on May 6, 2010 started.  If you were looking at it real time you could see that it started as a simple calm looking DOJI candlestick but then transformed into a monster in minutes.

This may be what transpires over the next few days.  CALM teasing action to tempt the bottom pickers and the technicians into going long because the market is ‘oversold’, but then the bottom falls out seemingly out of nowhere.

Today’s tape action in the market may have provided the final nail in the coffin of evidence that we are about to plunge badly again, possibly in crash type fashion or just continued waterfall fashion with huge swings in both directions but ultimately a lot lower.

Make no mistake about it, I am extremely bearish on the market right now and today’s tape helped to remove any lingering doubts I may have had.  I see the market at a juncture right now where it must blast higher by several hundred Dow points, otherwise it will totally collapse.  That is how well defined it looks to me right now.  It is either or, and nothing in between.  If I am wrong here then I will be wrong very badly and we will see this market shoot higher very fast and very wide.  If I am wrong, then it may have to do with volume, because the volume was quite light today and makes downside follow through look suspicious.  However the low volume is consistent with the symmetrical triangle pattern and descending triangle patterns I have alluded to before.  So you can see a surge in volume come out of nowhere from these patterns.

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Sp500 seems like it is ready for a New Panic Cycle

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The wild volatility over the last 2 weeks I think had a lot of people probably feeling like they just entered the spin cycle in a washing machine.  The market was showing huge signs of strength and then equally huge signs of weakness back and forth.  In the final analysis I think we can basically say that the last two weeks the market has basically traded flat.

But a market that trades flat still means something.  It means the market has created sideways cause ( or energy) for the next big move.  It looks more and more like that next move is going to be down in a new panic cycle. 

I can give you plenty of reasons why the market could still get a bounce to the 1100 to 1150 range but so far it has already tried to bounce above the 1100 and has failed.  It may try again (especially considering the extremely heavy oversold closing Arms value we has on 6/4/2010) but my instinct tells me it will just engage a new panic cycle starting tomorrow.

If you look at the 2/10/2009 date you will see a similar market basing period that looks quite similar to the period we are in now.  Also notable is that on that 2/10/2009 there was a similar very high closing ARMS value but not nearly as high as 6/4/2010.

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