On August 17, GLD traded above the monthly Starc+ band that was at $173.30. The August high was $184.82, and then in early September, GLD made a higher high of $185.82, which was also above the monthly Starc+ band (point 3). Since 2006, this had only happened twice.
In April and May 2006, GLD also traded above the monthly starc+ band (point 1) before dropping 23.8% from the May highs. GLD also traded above the monthly starc+ band for three months during the period from January through March 2008 (point 2), when it rallied 20%. This was followed by an eight-month correction that took GLD 34.3% lower, from $100.44 to $66.
GLD is currently just 15.9% below its September highs, as the decline so far has not been too severe. The monthly on-balance volume (OBV) through the end of November was acting stronger than prices, which is consistent with a positive long-term trend.
In August and September, GLD stayed above its weekly Starc+ band for three weeks, which was also a strong warning signal. This last occurred in GLD in April 2006 when prices exceeded the Starc+ bands for five weeks.
Once prices turned lower (point 1), the drop was quite dramatic, as it took only five weeks to drop below the Starc- band, point 2. During the week ending November 10, 2007 (point 3), gold's high at $848 slightly exceeded the Starc+ band at $837, and for the next six weeks, gold moved sideways, testing the six-period MA before resuming its uptrend. This is a very typical pattern.
Gold had reached a low of $773, which was $75 below the high. By the latter part of March 2008, gold reached $1033 (point 4), peaking just below the Starc+ band at $1043. For the rest of the year, gold moved back and forth between the Starc bands and tested the Starc- band three times, culminating in the October 2008 drop (point 8).
Gold rallied steadily from these lows and by late-February 2009, it approached the Starc+ band (point 9), which turned out to be the beginning of a triangle formation. Frequently, a test of either the Starc+ or Starc- band will be followed by the formation of a continuation pattern before the trend resumes.
NEXT: Study Another Past Example in Gold