Archive for November, 2009

Can The Largest Gold ETF (GLD) Stage A Break Above Major Resistance?

Posted in GOLD (GLD) on November 15th, 2009 by admin – Be the first to comment

By Jim Donnelly, Olson Global Markets

With the value of the dollar weakening almost daily, the price of gold has risen steadily since March. Former trend line resistance on the SPDR Gold Trust EFT (symbol: GLD), the largest gold ETF, was then broken above on September 11th with the price of gold rising since then. Although deemed a “crowded trade” by many market observers, a major test of resistance appears to be nearing for gold and corresponding gold ETFs alike.

Key resistance drawn off the March 13, 2008 high, parallel to trend line support dating back to 2005 suggests that the $110.50 area on GLD is major “channel top” resistance at the moment. With overbought conditions present on both stochastic and RSI (relative strength index) studies, the $110.50 level on GLD would normally represent an attractive level to take profits, trim positions and reduce exposure.

These are not normal times however, which makes the upcoming “channel top” test even more important and interesting. A solid close above $110.50 would be considered a key “breakout” to the upside which, in turn, could trigger “follow-through buying” causing another spurt higher to occur in the price of gold.

The failure to spark such a “breakout” however, would likely result in a correction to the downside that should be accompanied by a reversal higher in the value of the greenback. This key test should come soon and investors should be focused on it.


One Week Later: Another Look At The S&P 500 Index

Posted in The S&P 500 Index (SPX) on November 9th, 2009 by admin – Be the first to comment

By Jim Donnelly, Olson Global Markets

With bearish technical divergences present on daily bar charts, we had anticipated a deeper correction to the downside to emerge on the S&P 500 Index (SPX) just last week. It did not. A break below two forms of support at the 1,045 level turned out to be just a temporary event with limited follow-through selling. Moreover, Friday’s employment data, which appeared to give wary investors enough reasons to trim positions, did not send the S&P 500 Index lower either.

What happened? Another look at the S&P 500 (SPX) revealed that one particular “cross” trend line that had acted as either support or resistance dating back to December 12, 2008 provided support at 1,029 on November 2nd with oversold conditions present on daily bar charts.

With that in mind, it might be important to note that a parallel trend line (to this particular “cross” trend line) drawn off the highs of both 1/6/2009 and 10/19/2009 now sits at 1,115 with daily stochastic and RSI (Relative Strength Index) studies rising bullishly.

Although Friday’s post-employment data trading session was characterized by depressed volume levels, it might just turn out that a march toward 1,115 has begun in the short-term. The dollar index (DXY) is heading lower again and the price of gold rising. Both of these circumstances appear to be in sync with a move higher in the SPX.

The real question is whether the 1,115 area will prove to key resistance on the SPX , if tested relatively soon.