A Tale of Two Pivots
Today we take a look at the SPDR Gold Trust (symbol: GLD) and the i-Path Goldman Sachs Crude Oil ETN (symbol: OIL). The price of GLD sits right above a “super” pivot and OIL gap below a key pivot on Friday. It’s a tale of two assets and two pivots. GLD hangs in there. OIL has broken down.
Figure 1 is a daily chart of the GLD. The gold and black dots are key pivot points, which define the best areas of support (buying) and selling (resistance). The combination black and red dots are “super” pivot points — for lack of terminology — and are more selective in determining areas of support and resistance. Focus on the “super” pivot points (green up arrows). Prior to the current “super” pivot, there have been 10 “super” pivot points printed since 2005. 9 out of 10 these super pivot points have marked the low point for the subsequent up move that followed. GLD remains above support (158.20) and represents a low risk entry point especially in light of the fundamentals (i.e., falling interest rates, safe haven status, central bank interventions).
Figure 1. GLD/ daily
Figure 2 is a daily chart of the OIL. The key pivot points are noted with the green (support) and red (resistance) dots. On Friday, price opened below the most recent key pivot point at 25.53. This was a break of support and it only took a few short hours before prices touched the 200 day moving average. The next level of support (buying) is at 23.66. For those who need to put a “spin” on the price action, the break down in OIL likely reflects weaker economic growth.
Figure 2. OIL/ daily
In summary, GLD is hanging in there and is above support. OIL has broken down and is likely to move lower.
Lastly, our crude oil model remains bullish on crude oil. Our crude model has been bullish since November 30, 2011, and after 5 months, we now find the position several percent underwater. Looking ahead, I suspect this position will likely be closed out for a small loss (hopefully) by the end of the month.
