Bearish pressures stuck around on Wall Street as the lack of resolution on Capitol Hill prompted investors to remain on the sidelines during the third day of the U.S. government shutdown. Economic data releases were mixed on the day, though investors paid little attention to these reports; weekly jobless claims were better-than-expected while ISM non-manufacturing came in short of analysts’ estimates [see The Biggest Technical Glitches On Wall Street].
Our chart to watch for today is the State Street SPDR Gold Trust (GLD, A-), which will look to rebound off a key support level and potentially take on “safe haven” appeal amid all of the political uncertainty on Wall Street.
Consider GLD’s one-year daily performance chart below. This ETF has been struggling to resume its longer-term uptrend ever since falling below its 200-day moving average in February of this year. Fundamental factors, namely improving growth prospects, have taken their toll on gold as investors have been largely selling out of defensive assets, including the precious yellow metal and Treasury bonds, and jumping into growth-sensitive stocks. GLD has shown signs of bottoming out (blue line) since rebounding off its June 2013 lows; however, this ETF has still failed to summit resistance (red level) beneath $140 a share, which is the same level where it failed in early June [see also 3 Market Valuation Indicators ETF Investors Must Know].
GLD does offer attractive upside potential at current levels, but we advise conservative investors to utilize caution as well as tight stop-loss orders if jumping into a long position given the longer-term downtrend still at hand [see How To Take Profits And Cut Losses When Trading ETFs].
From a technical perspective, GLD remains range-bound; this ETF has immediate support around $123 a share. In terms of upside, GLD will likely face stiff selling pressures as it nears resistance just below the $140 mark. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.
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Disclosure: No positions at time of writing.