First thing to note is that between yesterday and today, it strongly bounced off of a shorter-term trend line that dates back to early July. However, even though an equivalent wouldn't emerge in the actual gold chart (since it is 24 hours), the move back up today simply closed the gap in the GLD chart that yesterday’s action had created. So, obviously we need more information in order to know what it all means.
But, taking the broader view of the past 6 months (which is what the entire chart captures), you’ll notice the line drawn in that dates back to the first dump in April – and here’s where maybe I’m trying to be too cheerful – it could be interpreted as the neckline of a large inverted head-and-shoulders formation. Which would suggest that yesterday’s levels should hold and that we could expect the next move up to re-test that neckline.
At the same time, there is a sound thinking which holds that bear markets, such as the one that gold has experienced in the past two years, don’t reverse themselves in a V-shaped manner (which is what the July low would suggest). Instead, it takes time and muddling through the lower levels as a new base is formed.
Again, I don’t know. I have been wrong at most junctures. But, if it’s any consolation, the theory also holds that even the most adamant bulls begin to question themselves when the real bottom gets formed. From what I’ve been reading here and there, it kind of feels like that is starting to happen.
