Wednesday’s ETF Chart To Watch: SPDR Gold Trust (GLD)

by on October 10, 2012 | ETFs Mentioned:

Stocks have kicked off this week on a sour note as profit-taking pressures built up over the weekend following last week’s bullish finale. To top it off, headlines from Europe continue to cause concerns on Wall Street as investors deal with the looming political gridlock overseas, while also battling presidential election jitters at home. Earnings season is also underway and Alcoa appears to have kicked off the ceremonies with a positive tone after the aluminum behemoth posted better-than-expected results [see also ETF Insider: Trading Ideas For Earnings Season]. 

Investors will focus on domestic economic conditions later today as the Fed Beige Book hits the street this afternoon. As such, the State Street SPDR Global Trust (GLD, A) may experience volatile trading depending on the latest insights regarding the health of the U.S. recovery. The Beige Book is published eight times a year and is comprised of economic indicators from each of the Federal Reserve Bank districts [see also How To Play $10,000 Gold].

Chart Analysis

GLD has been drifting sideways since mid-September of this year as the precious metal has continued to flirt with major resistance levels. Notice how this ETF is trading just below $175 a share, which is the resistance level (red line) that it previously tried, and failed, to summit back on November 8, 2011 and more recently on February 28, 2012. Judging from the chart below, it’s quite clear that GLD has a history of encountering heavy selling pressures as it approaches the $175 mark; however, its current bull run (blue line) may end differently seeing as how it has developed over four months, making for a healthier uptrend compared to its super steep run-up (purple line) in the beginning of 2012 which spanned a mere two months [see also GLD-Free Gold Bug ETFdb Portfolio]. 

Click To Enlarge

Another piece of bullish evidence is the fact that GLD has managed to stay above $170 a share over the past few weeks, which is very encouraging considering that it failed to do so during its previous two attempts at breaking the $175 level [see also 101 ETF Lessons Every Financial Advisor Should Learn].

Outlook

If the Beige Book paints a gloomier-than-expected economic outlook, the precious yellow metal may take on safe haven appeal; in terms of upside, GLD has major resistance at $175 a share. On the other hand, a bullish reaction to the latest economic report may tip the scales in favor of risky assets; in terms of downside, this ETF has immediate support at $170 a share followed by the $165 level. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.

Follow me on Twitter @SBojinov

[For more ETF analysis, make sure to sign up for our free ETF newsletter or try a free seven day trial to ETFdb Pro]

Disclosure: No positions at time of writing.