GLD Gaps Below Rising Wedge, SMH Rejected Off Wedge Backtest

A quick update on a couple of the things that stand out this morning. First, GLD (Gold ETF) has gapped down below the purple rising wedge pattern. I still don't care to short it & just plan to watch to see if it can regain the wedge shortly or for the next objective long entry if it moves lower from here.

GLD 60-min March 1st

GLD 60-min March 1st

As gold & the broad markets often move inversely, that relationship held true today with the broad markets gapping up at the open with the gap being largely attributed to Trump's speech last night, which was apparently lacking in details from what I can gather. Hopium rallies & gaps, especially those that occur in a very low-volume market can be erased just as quick as they happen & my expectation is that today's gap in the broad market, much like the large gap in the semiconductors, which was nearly completely faded so far on very impulsive selling, will also be erased & then some in the very near future.

The semiconductors are still on watch as a potential official trade idea & still look to be one of the more promising sectors for a multi-week to multi-month swing short as soon as we get confirmation via an impulsive break & close below the primary (white) uptrend line on the daily chart below. I've also included as 60-minute chart of SMH highlighting a breakdown & backtest, where SMH was impulsively rejected today, fading nearly all of its large gap & I would be surprised to not see the semis close red today.

Mar 1, 2017 10:34am|Categories: Equity Market Analysis|Tags: , , , , |2 Comments


  1. GetItRiight March 1, 2017 12:19 pm at 12:19 pm

    TO me it seems that gold regained the wedge. Geez, they are not letting this correct.


    • rsotc March 1, 2017 1:56 pm at 1:56 pm

      Yep, I just saved an update chart that I was going to post when I saw your comment. Nice recovery in GLD to snap back well within the wedge, already recouping nearly all of the early large gap down so far today. As I said, despite the trendline break & divergences, I have no desire to short gold or the miners instead looking for the next high-probability/objective long entry.

      Although the equity markets appear to be headed for a green close today barring some unusually sharp reversal & sell-off into the close, my expectation is that the recent resiliency in gold despite what appear to be bearish technicals on the 60-minute chart is a result of a continually money flowing into gold in expectation of an impending correction in stocks. Yes, stocks are rising but on extremely low volume in recent weeks which could be as much of a lack of sellers (and short-covering) than an abundance of buyers.

      Also notice that JNK & HYG (junk bonds) are trading down today Junk bonds typically trade much more inline with equities than other fixed-income classes as they are more responsive/predictive of the health of the economy vs. interest rates. One day does not make a trend but I’ll be on the lookout for any additional divergence between junk bonds & the stock market in the coming weeks as I have shown the divergences (via high-yield credit spreads) as an accurate predictor of major corrections in the past. Here’s that updated GLD 60-minute:


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