Long GLD Based on Technical & Fundamental Factors
Here we are looking at a weekly chart of
GLD
over the last 15 years.
We can see that GLD saw a solid 7-year trend from 2005 through to 2012, which coincided with the 2008 financial crisis. It reached a peak of $180 and then proceeded to retrace around 40% down to a low of $100 in Jan 2016, which was when the markets were rocked with unfavourable Chinese Economic data.
GLD has been consolidating, tending slightly higher for the last two years and we can now make several observations:
Another thing I would like to draw attention too is a divergence in Momentum, beginning in July 2013. From this point, you can see the MACD indicator rising whilst price action was falling. Divergences like this on their own are not reliable indicators; divergences can unfold for decades and not provide any reliable trading signals. However, given the other technical indicators, we feel this adds credibility to the idea that GLD is going to see a substantial move to the upside.
Regarding the Fundamental view, this comes at a time when interest rates are set to rise the most in over a decade (currently 3 rate hikes planned), Central Banks are about to unwind balance sheets (unprecedented policy experiment) and all economic indicators are overly optimistic (which is a contrarian signal). In the last two weeks we have just seen volatility returning to the markets for the first time in well over a year and wild speculation about cryptocurrencies and their comparison to gold has instruments like GLD in the spotlight.
Historically, GLD outperforms when equities turn bearish, as it is seen as a safe haven from risk. We are currently seeing one the greatest bull markets in S&P 500 history (see related idea) and we are due for a reversion to the mean in equities. It is only healthy for them to fall, and it is only natural (based on investor irrationality and fear) for Gold to rise.
We feel that this is a perfect storm for GLD and that price action will explode upwards. Our conservative action would be a 20% move to the upside by the end of the year(75% probability). Depending on economic factors and market volatility, we will reevaluate on the assumption that price action will continue to test the previous highs of $180 and set new all-time highs.
As price action is very close to breaking through, we will observe GLD more closely on daily charts from this point forward.
GLD
over the last 15 years. We can see that GLD saw a solid 7-year trend from 2005 through to 2012, which coincided with the 2008 financial crisis. It reached a peak of $180 and then proceeded to retrace around 40% down to a low of $100 in Jan 2016, which was when the markets were rocked with unfavourable Chinese Economic data.
GLD has been consolidating, tending slightly higher for the last two years and we can now make several observations:
- There is an Ascending Triangle Pattern forming. That means that Bulls and Bears are in a constant war, however, the bulls are winning more of the minor battles.
- Price action is tightening, like a coiled spring against the solid line of resistance at $130 which goes back ten years.
- The initial move was accompanied by strong volume.
- The 50 & 200 Period SMA's are about to cross.
- MACD is about to cross into positive territory and in an uptrend.
Another thing I would like to draw attention too is a divergence in Momentum, beginning in July 2013. From this point, you can see the MACD indicator rising whilst price action was falling. Divergences like this on their own are not reliable indicators; divergences can unfold for decades and not provide any reliable trading signals. However, given the other technical indicators, we feel this adds credibility to the idea that GLD is going to see a substantial move to the upside.
Regarding the Fundamental view, this comes at a time when interest rates are set to rise the most in over a decade (currently 3 rate hikes planned), Central Banks are about to unwind balance sheets (unprecedented policy experiment) and all economic indicators are overly optimistic (which is a contrarian signal). In the last two weeks we have just seen volatility returning to the markets for the first time in well over a year and wild speculation about cryptocurrencies and their comparison to gold has instruments like GLD in the spotlight.
Historically, GLD outperforms when equities turn bearish, as it is seen as a safe haven from risk. We are currently seeing one the greatest bull markets in S&P 500 history (see related idea) and we are due for a reversion to the mean in equities. It is only healthy for them to fall, and it is only natural (based on investor irrationality and fear) for Gold to rise.
We feel that this is a perfect storm for GLD and that price action will explode upwards. Our conservative action would be a 20% move to the upside by the end of the year(75% probability). Depending on economic factors and market volatility, we will reevaluate on the assumption that price action will continue to test the previous highs of $180 and set new all-time highs.
As price action is very close to breaking through, we will observe GLD more closely on daily charts from this point forward.
