Friday’s ETF Chart To Watch: SPDR Gold Trust (GLD)

ETF Database

Buying pressures and short-lived pullbacks are still the two most dominant themes on Wall Street since major equity indexes began their bull run on November 16 of last year. With economic data releases largely coming in better-than-expected over the past few months, investors have had few reasons to take profits amid the rallies; the S&P 500 Index is inching closer and closer to all-time highs near the 1,576 level while the Dow Jones Industrial Average continues its ascent into previously uncharted territory [Download 101 ETF Lessons Every Financial Advisor Should Learn].

The SPDR Gold Trust (GLD, A) is on our radar today as this fund could swing wildly in either direction as investors digest the latest monthly employment report on the home front. Analysts are expecting for the unemployment rate to hold steady at 7.7% while nonfarm payrolls are expected to drop down to 190,000 compared to last month’s figure of 236,000.

Chart Analysis

While equities have been surging, gold prices have been sinking for the past few months; since peaking in October of 2012, GLD has been stuck in a dismal downtrend (red line), consistently making lower-highs and lower-lows. What’s noteworthy is that this ETF has been flirting with a major support level (blue line) in recent weeks, which has enticed contrarian buyers looking to establish a long position in the yellow metal. GLD managed to rebound off the $150 level in late February of 2013; however, bargain buyers have been left empty handed as this ETF failed to re-establish support above the 200-day moving average (yellow line) and is once again testing the same support level [see How To Swing Trade ETFs].

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From a long-term perspective, GLD looks like a bargain at current levels; however, we advise conservative investors to hold off on jumping in long until this ETF establishes definitive support above $150 or even $160 a share, depending on individual risk preferences [see How To Take Profits And Cut Losses When Trading ETFs].

Outlook

If the latest employment report misses expectations, investors could pile into the safe havens; in terms of upside, GLD has near-term resistance around the $156 level. On the other hand, upbeat economic data can inspire further selling pressures in the gold market; in terms of downside, GLD has major support around $150 a share. 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.

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