GLD And GG

From April 8 on the GLD:

"The RSIs are improperly positioned (bearish) with the 34 below the 55 ... the 55 below the 89, etc. On any rally in the GLD, the RSIs will rally into Bearish Synchronicity at/near the broken neckline of the H&S Top. They will need to "Go Go Go" to get back above the neckline, and get bullishly positioned again. Possible, of course, but that's going to require some muscle."

I got involved with playing other things last week and didn't take advantage of a nice shorting opportunity.

We got the rally in the GLD, back above the broken neckline of its putative H&S Top, and we also got the rally in the 55 and 89 RSIs, to Bearish Synchronicity, just below the broken neckline of their H&S Tops. The RSI's didn't have the muscle to "Go Go Go" through the broken neckline. Rather, they turned back down from Bearish Synchronicity on Tuesday, April 14, issuing a Sell Signal.

The April 13 candle, circle in red, is the "pivot candle." That's the day that the RSI's went into Bearish Synchronicity, meaning that the RSI readings are close (I use roughly a half a point), and that they are improperly positioned with the faster RSIs below the slower RSIs.

When the 87.60 low of the pivot candle got taken down the next session on a print of 87.59, that's the Sell Signal from that particular indicator. We never allow indicators to TELL US what to do, nor do we allow anything about technical analysis to TELL US what to do. The RSIs, when issuing this Sell Signal, do not have a clue what the chart looks like. We do.

This RSI Sell Signal, and any other Buy or Sell Signal for that matter, simply is an "invitation to dance," so to speak, and if I had been watching this last week, I would have grabbed my partner and headed out onto the dance floor! LOL.

The GLD had gotten back above the broken neckline/trendline, putting the downside target of 74.53 ON HOLD, but the RSI Sell Signal and the break below the April 13 Pivot Candle low of 87.60 strongly suggested that the GLD was headed back below the neckline/trendline, and if it wasn't, the stop was above the 88.45 high of the pivot candle for a very nice risk:reward on a short entry.

The GLD hung about the neckline/trendline Tuesday and Wednesday, then fell toward the recent 84.97 low, putting the downside target of 74.53 back IN PLAY.

If I had shorted at the 87.59 Sell Signal, I definitely would have covered at least some at Friday's close because of Double Bottom, or "W"-Bottom (synonymous), possibility with the 84.97-84.92 lows. It's a VERY skimpy pattern possibility in terms of width and it doesn't look like much of a contest at all for The Bulls, going up against the much more sizeable top that The Bears have got in place, but it would be a perfect Bear Trap if The Bulls can stage a rallly from here, back above the neckline, and continued higher. Bears who shorted either of the neckline breakdowns would be trapped in that situation, thus "Bear Trap." A perfect example of a "Bear Trap" is the January 15 channel breakdown in the GLD, seen in the next chart.

That channel began back in November, 2008, and the January 15 Breakdown/Fakeout was a HORRIBLE Bear Trap. The GLD ripped higher, putting a wicked squeeze on the shorts.

For something like that to eventuate in this time-frame, the GLD simply could rally off this skimpy Double Bottom, or even more deceptively, selloff some more to the bottom of the Wedge in this chart, which comes in on Monday, April 20 at 83.784, then rally.

If we're to have a Bear Trap, I would prefer the latter possibility because it's so naughty. LOL. It would "look like" the Double Bottom possibility was blown (and, it would be), and that the GLD is headed down toward the 74.53 target that is IN PLAY, but it wouldn't be!

Here's a review of "The Tells" that we discussed two weeks ago in GG:

1. Failure at the Ascending Triangle Morph Line.

2. Failure at the Morph Line, on a Doji Star Hangman.

3. Bear Flag formation.

4. Bear Flag morph into a H&S Top (Bear Flags and Bearish Rising Wedges are notorious for doing that).

5. Right Shoulder failure at 34.83, just below the 34.93 Gap from the Doji Star Hangman close.

6. Rectangle/Double Bottom (32.31-32.31 lows) in the 5-Minute chart that got taken down on Friday, along with the 32.50-32.57 neckline of the H&S Top.

We can add to that list...

7. 34/55RSI Sell Signal on April 15.

8. Pennant formation that broke to the downside (Bearish continuation pattern) on April 16.

9. Break below the October, 2008 up trendline (seen in the next chart), on April 16.

10. Break below the bottom of the December, 2008 - April, 2009 Ascending Triangle, on April 17.

Lots of "Tells," and quite a Body of Evidence for the Bear case. Bulls who bought the Ascending Triangle breakout of March 19, or anywhere in the H&S Top above the Ascending Triangle breakout are caught in a "Bull Trap," meaning that they thought the breakout was bullish, but it wasn't. They're trapped up there in the H&S Top.



Notice the March Double Bottom lows of 26.17 and 26.15. That's possible horizontal support on any further selloff. If the GLD is going to sell off to/near the bottom of its Wedge (83.784 on Monday, April 20) to try to set a Bear Trap, I would suspect that GG would test that 26.15-26.17 support, and that it would bounce higher if the GLD can stick a landing on the bottom of its wedge, then rally.

I'll put these on watch and consider a Buy for a tradeable bounce, if that should occur. The GG chart isn't looking so hot here with these trendline/pattern breakdowns, but it (and the GLD) very well could set a Bear Trap as a "payback" for that nasty H&S Top Bull Trap, above the Ascending Triangle Breakout/Fakeout. LOL.