GLD: The trade that shows Arold’s edge

Yay! We all dodged a bullet with the Greek elections.

Now what?

Some argue that the worst is over for stocks. Andrew Wilkinson at Miller Tabak is out making the case for buying stocks again.

But who really knows if the big wall of worry — which includes Europe’s banks and sovereign debts, a potential China slowdown, and upcoming U.S. elections — are a collective hurdle that stocks can really climb?

So I asked two questions of Mike Arold, manager of the Technical Swing model:

What is your edge in this market? And is there a stock pick that demonstrates it?

I have one big advantage that the large mutual fund manager does not have. A large mutual fund has to be invested all the time. A manager of one of those big funds cannot move in and out of positions.

So whatever will happen in the coming months, I theoretically have the ability to move fast to take advantage of the market moves. And also correct the course if I am wrong.

If we get a major selloff, I hope to benefit through short positions.

If we see some stabilization because of better conditions in China and Europe, I will move into higher-beta long positions.

Right now, I am not being very aggressive in either direction. I consider myself to be a pretty conservative trader. My first goal is to always avoid the losses.

But here’s an example of how I can move in either direction — the the long or the short side.

Gold is sitting at very interesting technical levels. We could see either a breakdown, or a breakout on a QE3 type of situation.

So I am looking to take a position in the gold SPDR, the GLD, in the coming weeks.

I am going to wait to see how the move is likely to unfold, and wait to see where there’s favorable risk-reward, then commit capital to the trade.