There is always a bullish and bearish take on any stock or index at any particular time. The recent price action in the GLD ETF appears to have a bullish tone to it. But when we look at the larger structure there emerges a potentially different scenario.
This potential bearish scenario is currently unconfirmed and may not continue to develop bearishly. But it is worth keeping this bearish scenario in mind as we approach some key levels on the GLD ETF.
Specifically I am referring to a potential head and shoulders topping pattern on the GLD ETF. 135 is the level that is important to watch because it represents a resistance point that equates to the top of the left shoulder of this potential head and shoulders topping pattern.
If 135 is readily exceeded then in my opinion it would dramatically reduce the chance that this pattern is valid and evade the bearish scenario.
The recent price action in the GLD ETF also is forming up in a potential rising wedge which could be an additional bearish sign as we approach this 135 level.
The gold market is worth watching closely in the week ahead to see if we get confirmation of a top or rejection.
I also wrote about the SLV silver ETF yesterday which is very close to new 52 week highs. If the GLD ETF is stopped in the current range and starts to break down then it would seem to favor the SLV ETF also failing at its own recent swing trading range.
Editors note to this posting 2/16/2011: I notice today that the GLD is so far forming a quite potentially bearish looking rickshaw man candlestick, which could be a sign we are near an important reversal.. More on this later…