Conclusion, Investment Implications, Strategy

The SPDR Gold Shares ETF (GLD) gapped lower on Monday morning, moving below our 174.66 stop loss level right at the opening but stopped on a dime at its 200-day moving average, a widely-watched major trend proxy currently at 172.82 and immediately bounced higher.  For that reason, we did not execute our stop loss.  If your stop was triggered, however, you still ended up with a 3.1% gain while GLD simultaneously outperformed the S&P 500 (SPY) by 1.6%.  We have atypically lowered our stop to yesterday’s low of 172.95 and will exit the trade immediately should it be hit.

Introduction

In our Apr 21st Special Report entitled Gold ETF (GLD) Bottoming? we pointed out an emerging buying opportunity in the SPDR Gold Shares (GLD) ETF, which had just made a minor bullish trend change amid expanding investor asset flows.  GLD subsequently moved by as much as 7.0% higher on Jun 1 before retracing some of those gains over the past 2 weeks.

GLD gapped lower on Monday morning, moving below our 174.66 stop loss level right at the opening but stopped on a dime at its 200-day moving average, a widely-watched major trend proxy currently at 172.82 and immediately bounced higher.  For that reason, we did not execute our stop loss and, as of the open this morning, GLD is trading unchanged from yesterday’s close.

If your stop was triggered, however, you still ended up with a 3.1% gain while GLD simultaneously outperformed the S&P 500 (SPY) by 1.6%.  We have atypically lowered our stop to yesterday’s low of 172.95 and will exit the trade immediately should it be hit.

Sink Or Swim Time For GLD

The upper panel of Chart 1 below plots GLD daily since January along with its 200- and 50-day moving averages, widely-watched major and minor trend proxies.  The lower panel plots the daily total net assets invested in gold along with their 21-day (monthly, our Tactical time frame), moving average. 

Chart 1

The red ellipse in the upper panel highlights yesterday’s one-day positive response to a test of the 200-day MA.  Meanwhile, the red ellipse in the lower panel shows that the total net assets invested in GLD coincidentally dipped just slightly below their 21-day MA yesterday.  This means GLD must resume its recent advance immediately, within the next day or two, and on expanding assets, if it is still valid. 

However, should these assets continue to contract, we will exit our long idea — regardless of where price is — and close out the idea for a profit.