GLD May Not Yet Be Ready To Break Out

For those that follow me regularly, you will know that I have been tracking a set-up for the VanEck Vectors Gold Miners ETF (NYSEARCA:GDX), which I analyze as a proxy for the metals mining market. I believe that GDX can outperform the general equity market once we confirm a long-term break out has begun, and I still think we can see it in occur in 2018. This week, I will provide an update to GDX, but want to also discuss the SPDR Gold Trust ETF (NYSEARCA:GLD), which is an ETF that attempts to mirror the movements of gold. While I have gone on record as to why I do not think GLD is a wise long-term investment hold, I will still use it to track the market movements.

While GDX did move through the resistance region I noted last weekend, it did not do so in what I wanted to see as an “impulsive” move. That is a term of art which means a standard 5-wave structure which adheres to our Fibonacci Pinball methodology. Rather, when the market broke out over 22.30, it set up to run strongly towards the 23.20 region, which is the analysis I presented to those that follow my work daily. In fact, just before the market opened on Valentine's Day, I sent out an alert to my members noting how I viewed the smaller degree structure:

“Over 22.30, and we have an initial indication of a bottom in place. 23.20 then becomes the next higher resistance.”

As we saw, the market broke over 22.30, and then moved quite strongly higher and topped out this week at 23.16. But as I noted once we reached the 23.20 resistance region, this can still be a 4^th wave rally and point us down towards the low 20 region unless we are able to take out the 23.20 resistance strongly. As we now see, the market may be pointing us directly down towards that low 20 region in GDX, as we have been unable to break over 23.20 and have turned down.

As far as GLD is concerned, this is still presenting as a very bullish pattern. While I would have loved to have seen this breakout already, the current micro structure is not strongly suggestive of an immediate breakout. In fact, should we see an impulsive drop below 127 in the coming week; it opens the door to a drop down to at least the 124 region, but more preferably down to the 121.50-122 region, before we can set up again for a breakout.

But as I have noted many times before, for those who are looking for a long-term investment hold for gold, I would not suggest using GLD, as I have presented in this webinar I did some time ago. I tend to use GLD as a trading vehicle rather than an investment vehicle.

Lastly, a breakout over last week’s high in either GLD or GDX can alter the analysis presented above, as it is contingent on last week’s highs holding as resistance. Remember, we cannot know what will happen in the future with certainty. Rather, we can plan for what may happen based upon probabilities. But we also have to know rather quickly when and where those probabilities are no longer in our favor. Remaining in a wrong position while “hoping” is what destroys more accounts than anything else.

See charts illustrating the wave counts on the GDX, GLD, YI & ABX.