Hold gold?

The Pivotal Perspective was all over the rally in gold. From my view you didn't have to think about it too much - an asset class that was below all pivots especially long term levels for much of the last few years was suddenly above 3/4 levels and bells were ringing. Here is a summary review post with links to the originals.

Also on 2/1: "If it rallies above the YP with a look of support, then add." Even if you bought the close of a massive rally bar, you were in at 112.32, although if buying that day above the YP then could have been as low as 109.75. 

So like TLT, the question here is one of management. The original buys 1/25-29 are very easy to hold, but what about the add? As of last week GLD was above its YR1 - OK very overbought RSI, but not rejected from the pivot level. Now there is a gap down that could be rejection. Exits are trickier than entries but I think there are a couple reasons to hold it. 

This move has been the best jump above long term levels since July 2012 and that was a high test attempt after a multi-year tremendous run. There was one attempt in 2014 that barely cleared the level and immediately faded; then another early rally in 2015 that lasted 3 weeks above the YP after tagging the 1HR1 for the high of the year. So this time *is different* compared to the last 2 years. 

Long term moving averages like the monthly 20MA and daily 400MA point to a similar conclusion (charts not shown).

Granted, it would be easier if the $US fell back under its YP at 96.48. That said, faith in central banks is not the same as last year. Their maneuvers, instead of looking like backstopping the market, are growing more suspect. This could increase the support for gold. Last, Goldman Sachs has been 5 for 6 on its top trades of 2016 and they are calling for a short today. So maybe that is a hold :)

On the daily view, you can see the drop under YR1 thick red crosses 118.98, but let's look at levels that could act as support. FebR3 is at 114.53 which would also be a possible gap support. Even though FebR3 is a resistance level, it has convincingly cleared and the nearest medium term level that might be support. 

Zooming into short term levels, GLD has been entirely above its weekly pivot since 1/20  to today - quite a run. One week holding the weekly S1 at 114 area would not be too bad. Let's see what happens.