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Gold vs. Wall Street’s Program Traders

Gold ran into trouble last week after an encounter with its important 150-day (30-week) moving average. The 150-day MA, which is an important psychological resistance barrier that is programmed into many Wall Street trading algorithms, was touched by gold a few days ago and was unable to overcome it. I’ve long maintained that the 150-day moving average is a psychologically significant benchmark for the gold ETF, both as a line of support and resistance. GLD’s performance in recent days has confirmed this observation.

To illustrate the technical and psychological significance of the 150-day trend line, during the boom years between 2009 and 2011 gold and the gold ETF always respected the 150-day MA as the proverbial “line in the sand” during corrections in those years. During the entirety the 2009-2011 rally, the gold ETF never once penetrated the 150-day MA until late 2011 when the last bull swing ended.

Sellers took the initiative away from the bulls and have been in control the last few days. The SPDR Gold Trust ETF (GLD), a reliable gold proxy, had an unsuccessful test of the 150-day MA on Oct. 31 as the following graph shows. As long as gold and the gold ETFs remain below the 150-day MA the bears can claim control over the intermediate-term trend. A close above the 150-day MA, however, would set up a re-test of the late August high and would be an inviting target for the bulls to complete a bottoming pattern that was begun four months ago.

Source Financial Sense

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