Wednesday, February 24, 2010

Did You Sell GLD, GDX, SLV?

Ok, this one is for all you bull market geniuses out there who have been buying the SPDR Gold Trust (symbol: GLD), the Market Vectors Gold Miners ETF (symbol: GDX), and the i-Shares Silver Trust (symbol: SLV) all the way down and since they peaked in mid January.

Let me remind you that the last time we visited GLD, GDX, and SLV it was on January 20, 2010 when I stated that "it is my expectation that precious metals will be under pressure." So let's revisit those ETF's, and see where we stand a month later.

Figure 1 is a daily chart of the SPDR Gold Trust (symbol: GLD). The indicator in the lower panel is the on balance volume (OBV) indicator with a 40 period simple moving average. The red dots on the price bars are "super" pivots - another methodology that I have developed to delineate the best areas of buying and selling or support and resistance. On the GLD, I put red arrows over the January 20th price bar and the price bar inside the gray oval is from January 11 when I actually issued a sell signal on GLD.

Figure 1. GLD/ daily

The first thing we notice is that GLD remains above support at 104.37. The second thing to notice is the OBV indicator is leading price lower. One would think that support will be tested; a break below this level implies the breakout and gap at $100 being filled.

Figure 2 is a daily chart of the Market Vectors Gold Miners (symbol: GDX). The red arrows identify the January 20th price bar. The horizontal red lines are our important levels of support and resistance. Price is back below support, which is now resistance. The next level of support is at 34.64. The OBV is leading price lower, and the OBV moving average has rolled over as well. While points 1 and 2 on the chart were similar set ups to the current situation -i.e., a break below support and then a thrust higher - there is one difference in that prices are below their 200 day moving average.

Figure 2. GDX/ daily

Figure 3 is a daily chart of the i-Shares Silver Trust (symbol: SLV). The red arrows on the chart identify the January 20th price bar. SLV is already below a super pivot having gapped below this level and the 200 day moving average 2 days ago. The next level of support is at 14.78, and I would expect that level to be tested. Below that is 12.79.

Figure 3. SLV/ daily

I know I have been "completely wrong for the last 6 months" and none of this stuff works especially when it doesn't and analysis like this is completely "useless". Yeah, I think I have those quotes right!


Mike C said...

What is the time frame on this analysis? Are you negative on gold for the next several months only, or do you think the secular bull market from 2001 has topped out?

Anonymous said...

Silver is its own play. Until a break of 15.49 I don't see your play setting-up. It could still bounce above 15.98 from here, then 16.46 and then your play sets up into a mid march bottom?

Guy M. Lerner said...

Mike C.:

Hallelujah! Great question. Why? Because almost no one ever asks me about time frame when it comes to the analysis.

With that said I will provide you with a more detailed answer later today...but great question!

Guy M. Lerner said...

Anon: your 15.49 or 15.98 could be my 15.87; in other words and for me, the numbers become signposts of interpreting the price action; what I have done with the super pivots and most of my work is to determine support/ resistance in a consistent and quantifiable fashion

Thanks for contributing

Anonymous said...

I assume you are currently a bear. But are you still holding KRE?

Guy M. Lerner said...

As stated in prior comments, I have 16% holding that would be considered highly correlated to SP500...they are KRE, EWD, JOF

I had increased that to 50% long earlier in the week based upon the Rydex trade which was a small loser

Anonymous said...

I am holding my GLD cause for me it's a long-term (2-3 yrs), high conviction trade, and I'm fine with it retesting 100 or even 95. But you're short/intermediate term analysis is right on.

I've found your analysis in general to be very accurate. Keep up the good work.

everson said...


Sounds like you are getting pounded with idiocy...

Your site and work is great. I have been following your site for quite a while and have found your intermediate/longer term view to be a great help in my own (limited) investing. All the day-trading blogs are not conducive to a part time investors net worth.

I am with anon just above and have been in GLD for quite some time. I used your sell signal to avoid adding to my stake and am awaiting further analysis before doing so.

Thanks for your hard work!

Have you given any more thought to your plans for premium content?

Guy M. Lerner said...


thanks for the nice comments; "pounded with idiocy" would be correct but I just think it is folks with an unrealistic expectation of having someone call every twist in turn in the market; who saw today's 1% ramp over 20 minutes in the major indices coming?

I try my best to be helpful, thorough, and honest in my work. I am not sure why I do it but I enjoy it.

I know we have lots of readers looking for different things - this is a market. The best thing to do is to take what I say and what others say and incorporate that into your own program or plan. You cannot blame me or anyone else.

We have very smart people out there and they make 10% a year and they are considered heroes in this business. Think about that! That's how hard it is. You have to make it your own.