December 30, 2006


TLT, the 20+year treasury bond ETF, has suffered a severe correction taking it from 91.80 on 12/1 to 88.06 on 12/28, breaking the rising support line shown above in light blue (click on chart to enlarge).
Is the bullish case compromised? Tough to say. I personally exited my remaining long position yesterday 12/29 upon confimation of that break. However, I am looking to get back in should TLT stabilize around this level or a little below and it's easy to see why on the daily chart:
the nearby 87 level should act as serious support, having repelled the previous down move (10/23) and more importantly containing the upward turning 200-day moving average (dark blue line).
Stay tuned!

December 28, 2006


An update on GLD.
Shown above is the daily chart as of December 28, 2006 (click on chart to enlarge). We are at a critical juncture and for those of us who are long, partial profit-taking is in order.
My preferred interpretation of the technical picture is as follows:
The entire consolidation from the 5/12/2006 all-time high of 72.26 is an ABC correction as indicated on the chart. The bullish case established with the decisive break of a falling trendline on 10/30/2006 is therefore alive and well and the 12/1/2006 high at 65.55 is but an intermediate high on the way to a test of the all-time high. A break of the 65.55 high would confirm this scenario.

I would be lacking in intellectual honesty if I didn't mention an alternative scenario also alluded to on the chart above:
In that scenario, the 12/1/2006 high would be point D of an ABCDE correction. The area I circled in red could actually be a Head and Shoulder in the making with the right shoulder being spawned at this very moment. This scenario would come into play should GLD break the 12/18/2006 low of 60.65 (incidently a hammer). Should that happen, GLD should then test support at around 55 before rebounding and resuming its bullish progression at a later time.
Stay tuned.