Thursday, August 25, 2011

Technical Picture - Short Term Symmetrical Triangle

From the SPY 60 minute timeframe above, we see a symmetrical triangle developing. These are usually continuation patterns, but we won't know for sure until it actually breaks and holds. Today's action was somewhat predictable as we opened right into the gap fill level and faded.

Tomorrow we have GDP data in pre-market and the much anticipated Bernanke speech at 10:00. The speech is intended to quell market fears, but I'm not sure that can be achieved without further stimulus, and that seems unlikely.

The goodnight gold trade was on the short side and GLD opened in the 2nd level support zone. As we can see from the 15 minute chart below, we had positive divergence of the RSI to lower prices. The opening range carved out a hollow red candle which is usually bullish (filled black candles are usually very bearish). Price consolidated the early push in the upper range, setting up a gap fill long.

The SAR in the daily timeframe signals that the parabolic move is over, but how far can we retrace from here. Since GC futures have been very active in the overnight sessions, it is best to study the overnight moves in pre-market before jumping in. A 62% Fib retracement will take us back to $177.50 and perhaps form a H&S top.

BTW, we've read about all the genius traders that have been selling some of their gold holdings near the top - Soros, Sprott, and Doctor Phil, but generally speaking, beyond the well known gurus, gold is held by much stronger hands than silver, so it may not have such a rapid and devastating decent as we saw in silver a few months back.

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