Patterns Forming on GLD Daily Chart

04/05/2010 11:38 am EST

Focus: COMMODITIES

As you can see, the price action of gold has been trading within a few patterns the past couple months. First we saw a nice ABC retrace correction, and now it looks like a possible reverse head-and-shoulders or wedge pattern is forming.

All three of these patterns are bullish, but resistance must be overcome before I will start putting my money to work.


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NYSE and NASDAQ Indexes—Daily Charts

We saw the broad market trade sideways for the majority of the week. As usual, we had a pre-holiday pop in prices with the week closing slightly positive for stocks. These gains are generally given back the following week as volume picks back up.

The one thing that has me scratching my head is that the major indexes like S&P 500, Dow, NASDAQ, and Russell 2000 all stayed below their previous weeks’ high. But the NYSE, shown below as the top chart, clearly broke out to a new high.

I look at the NYSE as leading indicator, and this makes me think we could see stocks grind higher right into earnings season. All we can do at this point is wait for more data points on the chart and continue analyzing the market one day at a time.


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Trading Conclusion

As I mentioned last week, the market is overextended as we enter earnings season. The market is in the same situation as we saw going into the January earnings season.

I do not think we will have a huge pullback, but I think a 3%-5% correction is likely in the coming days or week. Once we get a pullback, we should see support around the 30- or 50-day moving averages and then see the market head toward new highs once again.

The precious metals sector is getting a lot of attention because of the whistleblower at JP Morgan stating that metals are seriously manipulated with a huge amount of short positions still in place. I think this could be helping this sector and I hope we get a low-risk setup in the coming week or two.

By Chris Vermeulen of TheGoldandOilGuy.com

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