As I noted last week GLD has gone parabolic since the beginning of this month. I leave it for others, more qualified than me, to investigate whether this move is justified or not. As far as I am concerned it is not but as I have already said, nowadays a lot of arguments can rest on the state of confusion in economics and financial policies around the world.
On the weekly chart of GLD above we can see that the 12-week RSI has reached extreme levels since 2005 at a reading of 87.13. Readings above 84 have produced some kind of a correction before.
The MEI, my proprietary indicator, is also at extreme and never seen before levels at 286.42. Usually there was a correction of some kind when the MEI rose above 120. However, this is not a usual situation. This is a parabolic market and these extreme values are possible.
More importantly, the extreme indicator values can get even more extreme before a correction takes place. GLD can stay overbought for longer than you can remain solvent is my message to short sellers. However, it smells like there will be a correction soon. Reversal or another buying opportunity? That will depend on the magnitude of the correction, amongst other things.
Have a good trading day!
Disclosure: no relevant positions at the time of this post.
Disclaimer: The author is not a financial advisor and does not recommend the purchase of any security or advise on the suitability of any trade or investment in any timeframe. ETF, stock, futures, forex and options trading and investing involves substantial financial risks and can result in total loss of capital. If investment or other professional advice is required, a licensed professional should be consulted.