[GLD] update: upside breakout a very high probability.

Below is the weekly GLD chart.  Look how it bottomed and then came back up and kissed the resistance offered by the lower rail of the triangle and then headed sharply back down.

For legacy TA folks that is very bad mojo.  Not only could GLD not break back up above that line, it also went below the last peak.  While this is certainly not a lower low, the rate at which it is falling can easily scare the big, leveraged players.  They will just sit it out until it is obvious that the trend has changed and now we know what that means to them: a break out of that lower rail of the 4th wave HT to the upside will be like ringing the dinner bell for longs and it will send the shorts running for cover.

The chart below will fool most legacy TA guys into thinking it is bearish (i.e. they will be tempted to keep selling while prices are this high...).  But it will also fool the novice EWer who says "now that wave has moved back into the range of wave 1 so the recent peak must be C and not 3".

Well first let me say that the gold chart is doing a good job of keeping the players confused.  It's working!  TRX has not caught a bid yet, for example, simply because nobody is really convinced that gold can hold a bid.  Again I say, the hyper juniors like TRX will not get any play until the world begins to believe that the recent gold rally was something more than a flash in the pan.  But all that will change when gld breaks out above that lower rail.  That's when even the weakest Juniors will go ape $hit.

Of course, since this is all about odds and not certainties so below is my wave count.

It will be interesting will be how this looks on Tuesday given that Monday is Washington's b-day. 

It took me some time before the obvious finally exposed itself to me:  This reversal is kicking off with an expanding wedge.  Expanding wedges are simply the worst volatility that can happen for "value" investors (those who have deluded themselves into thinking they know some kind of fundamental truth about the actual fair market value of the asset in question).  Legacy TA players might see it; they call it a wizard's sleeve and other such names.

If this count is right then strap on your safety harness because we are going to see some pent up upside volatility unleashed in GLD over the next 2-3 weeks.  It is basically making up for lost time.  Note that since the last wave had a triangle separating the two halves, the current wave should be a strong vee retracement.  Don't be afraid to let them have JNUG back for those 2-3 days!  Look for 5 up, sidestep the 2 day a-b-c reversal and then back in for 5 more waves up.  The target is the top rail and if that is hit then GTFO and in fact be bold, swing short to JDST because the 3 wave retracement back to the lower rail should be another fairly quick (2-3 weeks) affair.  The target is the lower rail or the level of the prior 4th for that wave.



Now that you know in advance that this could likely be coming you should be able to buy into the early strength and then set stops below red 4.  We might get an inclining double bottom on the lower rail before reversing strongly but we should not see any moves below red 4.  Be patient until you begin to see the acceleration pick up and then buy the first dip you find.

Expanding wedges tend to move pretty quickly in the 5 wave because the longer they take to transpire, the further away the goal post becomes.


Another way to play a bit more safely is to wait until you see the first small 5 waves up and then small a-b-c pullback before going all in with tight stops.

One more thing: perhaps the safest move of this whole sequence would be to buy JDST at that top rail, or better still after a breakout of the top rail and then a fall back below it.  If you catch some or all of the move up, at least risk that much on JDST on the way back down if you don't do a complete flip.  The retracement from these wedges is usually pretty brutal.  Having said that, 5-3-5 is you main guide not price.