The GLD ETF / Gold Breakout Needs Two Additional Signals!

9-16-2010: An article about what the GLD ETF needs to blast off to new highs.
Untitled 1

The GLD is waiting around just above the breakout point of 123.56 for TWO additional signals.

The first is for GLD to make another new high on the close today and thereby close the week at an all time high.

The second is for the GDX to follow it to new highs. 

How has GDX done relative to the GLD ETF?  Since the low in the GDX on 10-27-2008, GDX has returned around 296% while GLD has returned only 69%.

BUT what does GDX do in major stock market downturns?  In other words, what if the overall market sells off hard from here?

GDX greatly UNDERPERFORMS the GLD when the S&P 500 is diving as it did in 2008.  At the low on 10-27-2008, GDX was DOWN 70.56% while the GLD ETF was down only 27.1% from the high in gold on 3-14-2008.

So Dave, what's missing besides the new closing high on a weekly basis and the third UP day since the breakout?

The GDX must also break out. The reluctance of GDX to follow the GLD must be overcome to stamp this breakout as APPROVED.

CONCLUSIONS: FIRST: If you decide to average into gold here, realize that the breakout could reverse if 1) GLD does not close at a new weekly high and 2) GDX does not follow it.  The breakout in gold could reverse if we do not accomplish both of those things today or soon. 

SECOND: If the general market dives for the July 2010 lows, GDX will greatly UNDERPERFORM GLD if past history holds true.

THIRD: If the general market breaks out to new highs, GDX may continue to outperform the GLD ETF.

If you've enjoyed reading this, I have a small favor to ask you so I can keep in touch with you.  If you would like to know ALL my thoughts in regard to GLD and GDX ETF timing /market timing "Tips" like these , simply sign up for the FREE "Tips" newsletter below. 

I'll be in touch with material ONLY available to FREE subscribers to the TIPS and SP500Trackerâ„¢ newsletter. I have to "save" something for my FREE "Tips" subscribers and today will be one of those days.  If you sign up for the free subscription below, you will get the password to the Market Comments Page right away.

Please enter your email address and first name and HIT SUBMIT.