We haven’t done an update on gold and gold stocks since the end of February.  The reason for this is that their charts have been broken.  As technicians we look at price, volume, trend, strength, sentiment etc. to help us determine the likely path of a security.  But, when price breaks down hard it skews the chart pattern so badly that the most important component for technical analysis (price) becomes of little value (other than the obvious message that the stock is broken). As a result, all we can do is wait for enough time to pass for the stock to reassert a readable pattern.  Finally we’re starting to see a trickle of information from precious metals charts. In early February when GLD was trading above 160 and bouncing against the underside of its short term down trend line we gave up almost all bullish hope for the metal.  By the 13th of February we stated that if GLD traded back down to 150 that “GDX will almost certainly break

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Over the past few months we’ve noticed a pattern that has a fairly good track record for making trades based on our Twitter Sentiment indicator.  That pattern is a divergence from price that is followed by a break in a trend line that has been confirming the move in price. We’ll use GLD as an example to illustrate the pattern, then we’ll do an update on the prospects for gold and gold stocks.  On the chart below you’ll notice that over the two month period of June and July 2012 that GLD was in a minor down trend.  During that time period Twitter sentiment confirmed the down trend by painting lower highs (it was in fact confirming the downtrend that began in February).  However, in late June, smoothed sentiment for GLD recorded a very low reading followed by a higher low as price was compressing in a triangle.  That provided a set up where all we needed was a break above the confirming downtrend line on smoothed sentiment as a

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Last week we highlighted a positive divergence between gold (GLD) and Twitter sentiment for GLD.  We noted in that update that the breakout in price along with the positive divergence might be signalling the end of the recent consolidation in GLD.  That view is now at risk.  We’re at a point where GLD must move higher with positive sentiment or we’ll see more consolidation of the rally out of the May/July lows. On the chart below, Friday’s daily sentiment indicator painted an initiation thrust down for GLD.  This is not a good sign as strong negative readings on a downward price reversal often signal weakness in the near term.  In addition, we’re seeing lower highs in daily sentiment as well. Our smoothed sentiment indicator for GLD is breaking the upward sloping trend line that started in October.  It is still above zero, which gives GLD little breathing room, but a break of the trend line is our first warning of lower prices.  Smoothed sentiment painted a very similar chart pattern

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