That Was Fast

Well it didn't take several days for the GLD to breakout as gold has fallen over $40 this morning. The question now is whether the downtrend will accelerate or will gold find support at the previous highs.

Support at the 200dema for gold is at 1033, the previous all time high is 1029 and a measured move target from the January high is 1011. With gold currently at 1068, it doesn't make much sense to be heavily bearish against this support. On the other hand if support fails on the second try, we would certainly want to go with it.

Oil is also getting hammered today, but it remains above critical support at the December low. One frustrating thing about trying to trade the commodity via the ETFs is the tracking error and hidden expenses. From the 9/25 closing low to yesterday's close, the commodity was up 16.72%, but the OIL ETF is up only 11.05%, the USO ETF is up only 10.83%. This makes it difficult to maintain a proper stance with respect to the commodity since you are losing ground even when the commodity is above technical support. I usually try to trade the ETF based on the commodity, but I will have to work on position sizing to offset the tracking error.