A picture is worth more than a thousand words. This will be a short article because the chart below explains exactly what’s going on with gold.
Today alone gold dropped $50 an ounce, the biggest one-day drop in months.
The chart shows an ominous wedge or triangle formation. The lower support lines goes back to January 2011. The upper resistance line started with the September 6 all-time high.
This trend line sliced through 1,760 on December 4. On that day the ETF Profit Strategy Newsletter pointed out that: “Gold prices are butting up against a trend line that originates from the September high. This is a low-risk opportunity simply because the risk is well defined (the trend line). Traders may go short gold with a stop-loss at 1,760 for gold futures or 171.1 for GLD (NYSEArca: GLD).”
Since December 4 gold prices have fallen nearly $100. Today gold found support at the lower trend line and a moving average that’s provided support for years (see ETF Profit Strategy Newsletter for details).
What’s next for gold? Earlier this year in April, silver (NYSEArca: SLV) sliced away from its all-time high days before the major indexes a la S&P (SNP: ^GSPC), Dow (DJI: ^DJI) and Nasdaq (Nasdaq: ^IXIC) started to tumble. Silver now sliced away again. Will this usher in a repeat performance for stocks? Where’s important support for U.S. stocks?
The ETF Profit Strategy Newsletter monitors trend lines and other support/resistance levels for gold, silver, euro and the S&P. All major asset classes are at the cusp of breaking below major resistance. Yesterday’s special ETF Profit Strategy update includes an outlook for all major asset classes.
Gold-related ETFs: SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU), Market Vectors Gold Miners (NYSEArca: GDX), UltraShort Gold ProShares (NYSEArca: GLL).