Gold broke its shoulder yesterday, BUT it has not yet broken the base of the head and shoulders formation that has formed. Awwww poor gold. When I say it broke “its shoulder,” I mean that the GLD gold ETF traded below 134.85, which was the top of the left shoulder in October. That means the next logical target is around 130 or the base of the head and shoulders formation based on market timing analysis.

And what if that breaks? Then GLD goes down by the price distance from the high to the base of the formation. You then subtract that value from the price at the base where it breaks and you have the target of about 121.29 which is now about where the 200 day moving average is located. That would be the target ONLY if the base of the head and shoulders was broken.

5:40 pm Addendum: Where Gold ended today says it could bounce from here. It is sitting just above the 50 day moving average that is often watched by investors. If it closes back below there (it did fall below there today and then recovered), there will be another leg down. Breaking back below the left shoulder was just the first step. It must now slice through the support that this moving average provided today.

If you decide to take a new trading position, you may want to dump that new position if GLD closes back below that support or approximately below 133.64. We closed at just 133.81 and in the after hours market GLD has declined to 133.74.