Quick Look at Gold/GLD

After a brief interruption as the Senate leader retorts, which is one of the main reasons I said last week that I expect today to be volatile because the whole bus of clowns is back in D.C. today, it's back to this post I was working on.

This is a quick look at GLD because beyond the very short term, it's difficult to make heads or tails of what we have on the charts, when we have a situation like that we don't have an edge and when we don't have an edge, there's no point in trying to guess, either wait for the edge or move on to the next candidate.

I see short term weakness and I can even see that in the gold futures right now, I am guessing based on what I see that there will also be some intermediate term weakness or sub-intermediate to be more exact (think of this as similar to the market making a new low under the 11/16 low and around the same time). That would put gold in an area where it seems to have seen long term accumulation, perhaps preparing for an event a bit off in to the future that we are not aware of yet, but again, those aren't strong signals, just a best guess.

The charts...

 GLD (green) vs the SPY (red), it's very hard to make out what the Gold correlation is as it flips back and forth between moving with the market and moving against the market. Looking long term, gold has always done well under Quantitative Easing as the F_E_D prints fresh dollar bills which devalue the dollar and stir inflation, to buy Treasuries (also known as our debt) from Primary Dealers at a handsome profit for the PD's like Goldman Sachs and others. Someone has to buy our debt because increasingly we have seen Japan and China backing away from it at auction.

With QE3 announced as buying MBS, just like 2008, it had no effect on the market. It wasn't until 2009 when the first QE program was expanded to include treasuries did the market really take off and if you recall at the last F_O_M_C meeting, they added Treasuries to the list of monthly purchases, so Gold "May" be preparing longer term for dollar devaluation and inflation.

As for the immediate outlook, not so hot.


 1 min leading negative divergence in GLD, a similar signal can be seen in Gold Futures on the same timeframe. For the time being, I would probably look to close out the GLD position picked up (long) a little bit back.

 The 2 min chart also shows several areas at price highs where there have been negative divergences sending GLD lower and we have another one today.

At the 30 min chart we have a negative divergence at the September highs and 3C has pretty much followed GlD lower since. The one thing I suspect "may" be happening is this...

There seems to be a trend started about 14 months ago to buy GLD around the $150 mark, if we do see that happen again, we will have to take a look at gold more broadly as that would make nearly a year and a half (by the time it reached the zone) of accumulation. If there's a year and a half of accumulation the next great ride in gold may be getting prepared and once again it may be an asset that you might want the actual physical over the paper.

As always though, 1 bridge at a time.