Stocks charged higher on Tuesday as stimulus hopes ahead of today’s FOMC minutes kept confidence levels afloat, while a sparse data front further paved the way higher for major equity benchmarks. Bernanke’s testimony to the Joint Economic Committee of Congress this afternoon should offer some valuable insights into the Fed’s policy stance, which currently follows the “wait-and-see” approach as policymakers recently expressed their willingness to raise or lower bond repurchases depending on how economic conditions evolve.
As such, our ETF to watch for today is the SPDR Gold Trust (GLD, A-) because it has a history of volatile trading following commentary from Fed Chairman Bernanke [see also The Cheapest ETF For Every Investment Objective].
Consider GLD’s one-year daily performance chart below. Following its steep sell-off in mid-April of this year, GLD managed to rebound sharply. However, as you can see in the chart below, this rebound was short-lived as the precious yellow metal fund failed to summit $145 a share (blue line) over the course of two weeks. GLD has sunk back to support (red level) and is currently resting right around the same level that it managed to rebound off in mid-April; however, trading volumes appear to be much lighter this time around, which could hint that further profit taking may soon follow [see GLD-Free Gold Bug ETFdb Portfolio].
With GLD resting at a critical point ahead of FOMC minutes, entering into either a short or long position at current levels is extremely speculative and not recommended for conservative investors given gold’s reputation for staging volatile reactions following comments from Chairman Bernanke [see How To Swing Trade ETFs].
From a technical perspective, GLD appears to be trapped in a range at the moment with major resistance lying below the $145 level while major support comes in at $130 a share; note that a break below support will likely welcome accelerating selling pressures as countless stop-loss orders are triggered. 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.