GLD Update

Since SLV is my least favorite due to the horrendous amount of manipulation and since we have a fast moving market today, I'll start with GLD and then look at SLV if we have time.

As has been shown recently since the last F_O_M_C meeting, the debate I have been having with myself as to whether gold was acting as a risk on asset or a flight to safety asset as it has moved in both directions, I think it is fairly well settled for now, gold is a QE3 or monetary policy intervention sentiment indicator. If gold is to rally here, I believe that it is most likely looking to the ECB to add liquidity to the market before the F_E_D. The F_E_D has some hurdles to overcome before a QE3 like program can be initiated, the least of which would be their political independence in an election year. So if anyone is going to print and gold is reacting to that, it would seem the most immediate probability of central bank liquidity injections (other than a globally coordinated one like we saw last November, would be the ECB as European banks face a huge capital short fall and any default in Greece or if Greece were to walk out on the Euro-zone, would cause the EU banks huge losses and I don't think the ECB's LTRO 1& 2 were nearly enough to give the banks enough of a buffer as evidenced today by Spain looking to nationalize one of their banks and most likely inject liquidity in to the others.

There are other factors as well, not the least of which is India's recent policy adjustment dropping the gold tax.

As to my long term opinion of gold, as you know I have been of the opinion it is either in a primary or intermediate top.

 The long term 5 day chart sees GLD/gold go from a steady uptrend to a very parabolic move at the yellow arrow to a large triangle which is usually a sign of a top in this situation.

 GLD broke below the triangle and too out numerous other support areas such as the long held 150 day moving average and 200 day, the yellow trendline is where we expected an upside head fake move, which came a few days later, this was the 3 day GLD put trade (shorting GLD) that made 215% in 3 days. The head fake worked beautifully.

 Recently GLD has left several large gaps open, while commodities haven't shown the same degree of gap filling as equities have, the larger trend has been to fill gaps, there are quite a few and if the ECB is expected to loosen policy, GLD may be reacting as a sentiment indicator looking for ECB action or globally coordinated action which would give the f-e-d some political cover.

 Since going negative (there was a head fake move in the yellow box), the 1 min trend has been solid.

 The 5 min has been positive over the last 3 days.

 The 15 min has shown several positive divergences, GLD would probably have to fill all the gaps to make this worthwhile, but again, it is largely motivated my sentiment toward easing. If the ECB were to rule out easing, gold could be stopped dead in its tracks.

Here's the 30 min trend, from distribution which took on a leading negative divergence at the top to a relative positive divergence then a leading positive.

I think GLD has a chance here, but the larger implication may be for the market and it seems to be sentiment oriented, with the market looking for Central Bank easing/printing. I don't think the f-e-d has the cover to do it alone, but if there were to be an ECB/F_E_D action (the PBoC joined in as well last November), that would be more doable.