I did an update on gold (GLD) and gold stocks (GDX) at Trade Followers today. Things aren’t looking good. Here’s the chart that went with the post.
I’ve done an update to gold with its social media momentum indicators at Trade Followers. Long story short is that gold needs to move higher soon or the downtrend could accelerate.
The sell signal issued for Gold (GLD) on 3/19/14 from quantified StockTwits messages has ended. The downtrend line in quantified messages has finally be broken to the upside. Unfortunately for gold bulls it didn’t happen after a strong positive divergence with price. As a result, the sell signal is merely closed rather than flipping to a buy signal. For aggressive traders who believe in GLD there are other factors that might warrant a tightly controlled long trade. Notice that GLD had a strong volume washout in June of 2013. Then a double bottom in December 2013 on lower volume near the 114 level. That was followed by a very strong rally up to the descending trend line that has been in place since the peak in late 2012. It is logical for the ETF to be turned back at that trend line again, but since the double bottom has held for nearly six months the odds are increased that any retest of the 114 area will hold. So a long
Quantified StockTwits messages are flashing a sell signal for gold (GLD). After advancing for three months with support from the StockTwits stream GLD has turned over at a long term trend line for price. The reversal in price was preceded by a negative divergence from StockTwits that lasted a month. Now support from the StockTwits community has broke the confirming up trend in support. This creates the sell signal and increases the odds that GLD will at least consolidate in the near term and possibly resume its long term down trend.
A couple of weeks ago I posted charts of precious metals with their Twitter sentiment indicators. In that post I concluded that “precious metals need a bounce right here or we’re probably seeing the resumption of the longer term down trend.” Gold and gold stocks didn’t get the bounce and subsequently broke back below their 50 day moving averages. This increases the odds that a continuation of the down trend is underway. There is a silver lining though. Sentiment hasn’t broken down too badly with price. Although the SPDR Gold Shares ETF (GLD) smoothed sentiment broke its uptrend line, it has turned back up at a point that is still confirming the move out of the June lows. This puts GLD back in a position that it once again needs to bounce right here. Market Vectors Gold Miner Shares ETF (GDX) has a much healthier chart and sentiment pattern. GDX is still holding its uptrend line for price that started with the June lows. Smoothed sentiment barely dipped below its
During the rally out of the late June low the gold ETF I track (GLD) has had confirmation from sentiment generated from the Twitter stream. Smoothed sentiment has had a good uptrend that has held on dips. It’s currently coming back to the trend line and attempting to turn up even as price has fallen over the past few days. This is a good sign, but GLD needs to bounce right here or there will be a high probability for a resumption of the down trend. Another factor that may bring heavy selling if a bounce doesn’t materialize is that GLD is sitting right on its 50 day exponential moving average. A break below that level will almost certainly trigger some stops. The gold shares ETF that I track (GDX) has a stronger sentiment pattern than GLD. Smoothed sentiment had a large positive divergence from the hard break down in price in April to the break down in June. Since that time sentiment has held its upward sloping (and confirming)
A quick update on precious metals today. We didn’t get a counter trend bounce signal from Twitter sentiment for any of the precious metals before the current rally. This was because we didn’t see good positive divergences from price before the move started. Now that the metals are rallying we’re seeing confirmation of the move from Twitter sentiment that is painting higher lows and higher highs. Sentiment isn’t extremely over extended yet, but is getting near levels that might suggest a pull back is necessary before the metals can move higher. Below are charts of GLD, GDX, and Randgold Resources (GOLD). Notice that sentiment for Randgold is starting to paint a negative divergence from price as it nears the underside of the 200 day moving average. This is another indication that a pull back in precious metals may occur. A break of the uptrend in smoothed sentiment for Randgold would create an official sell signal for the stock (or consolidation warning if you believe it is in an uptrend). I’ll
We’re finally starting to see some hopeful signs for gold (GLD) and gold stocks (GDX). In our last update we mentioned that the chasing of precious metals by traders had stopped and that we’d finally got some capitulation in sentiment (calculated from the Twitter stream). This was the first thing we were looking for in order to create an environment where gold could create a durable low. Now we have our second piece of good news. Twitter sentiment for GDX is signaling that it is ready to attempt a counter trend bounce. This signal is created by the positive divergence between smoothed sentiment and price which subsequently broke above the prevailing down trend in sentiment (green line on the chart below). Volume on the recent low compared to the April low is also suggesting that GDX is trying to bottom. The high volume sell off in April forced weak holders of GDX to capitulate. In addition, it caused fear even among long term holders. This relieves some of the overhead
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
In the first week of February did an update on precious metals and stated that we were “getting concerned that gold stocks are going to renew their down trend”. Then two weeks ago we reiterated our pessimism due to the lack of tweets talking about being buyers of gold stocks. As we look at the charts again today we’re even less hopeful than before. Gold (GLD) had a small bounce above the $150 level and now appears to be ready to break it. Since the first of the year our Twitter sentiment indicator for GLD has mirrored the movement in price. This tells us that traders and investors alike are confused and are simply chasing price. When traders are making “rational” judgements about the future prospect of a security sentiment plots its own path. Short term traders often take profits on bounces and buy on dips, which shows up in our sentiment indicator as divergences from price near turning points. When market participants are confident in the direction of a