Wednesday, December 14, 2011

Technical Take GLD break confirmed, I am Selling GLD

The indices (DJIA 11954, S&P 1225) weakened further yesterday; though they still closed within their intermediate term trading ranges (10725-12919, 1101-1372).

The S&P broke the 1230 support level though the DJIA remains above its comparable level (11741). Our time and distance discipline now goes into effect for the S&P. Should the break be confirmed (1) it halts the completion of the developing reverse head and shoulders formation and (2) the next visible support level is circa 1158.

Volume rose a bit; breadth was mixed. The VIX was again down on a down day. While the explanation I received yesterday as to the cause of this unusual behavior may be occurring, this indicator makes me very uneasy.

Looking at our internal indicator, I am starting to see a little deterioration in the charts. Nothing pointing to a big Market break; indeed, if anything they are suggesting prices will hold at or near current levels. But it needs watching.

GLD pushed through that initial support level. In addition, the distance element of our time and distance discipline confirmed the break of GLD’s intermediate term up trend. As you know that prompted a sale of a third of our Portfolios’ position. At the Market open this morning, our Portfolios will Sell another one third of their GLD holding.

Bottom line: the break of the S&P below its 1230 support level was not a positive sign, though (1) the DJIA is not confirming the break and (2) our time and distance discipline has not yet confirmed the break. I am not going to get too beared up until the DJIA and S&P are in sync and the S&P confirms the break of 1230; however, at the least, the amber light is flashing.

GLD has busted its intermediate term up trend; the downside momentum should be accelerated by the effects of also breaking the pennant formation. Our goal now is to protect the profits our Portfolios have built in this holding.

Update on sentiment (medium):

Buybacks rise in 2011 (short):

Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.