Market Timing Gold: Will the Sell Signal Be Voided?

Gold (GLD) is attempting to recover from the SELL signal generated when it closed below the GLD high of 139.54. What I’ve described multiple times is that it’s important to pay attention when markets “play” with a particular number.  This is advice that translates into dollars.

When a number is important to a market, the market will “play” with the number, meaning that it trades just above and just below the number on the intraday time frame deciding which way to go. The direction gold turns from this point will likely determine the intermediate term direction of the market in my opinion. 

That makes the CLOSE today critical. A close above GLD of 139.54 (you can apply the same principle to both IAU and the spot gold price) will potentially void the SELL signal. Unfortunately, the only way to know if that is the case is to watch the follow through for at least 3 days.

There are reversals that fail after 3 days above or below a key level, but the odds of a failure of a breakout or recovery go down with each day of that breakout or recovery.

When selling, my personal preference is to exit trading positions, when market timing gold, while keeping a core position in gold that is not touched, at least until things get very stretched.  Some say that core should only be 5% while others are advocating up to 20%.  You should decide what you are comfortable with.

I would begin averaging back into GLD only with a close over 139.54 and I would do so slowly. Gold and oil are both setup to reverse hard if the world scene calms down.  They will very likely both ease off their highs.  There is heightened risk in these markets whatever the market timing signals say.

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Standard Disclaimer: Remember, it’s your money and your decision as to how to invest it.

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