For years gold has been the trade/asset everyone has been talking about, which always raises the question of a bubble and I know all the bullish arguments, they are no different than any other bubble, "This time it's different" and I can't say I disagree with a lot of the arguments, but they are similar to all bubble arguments. As I have noted, I use my friends as a bubble gauge, when their wives became real estate speculators (most were home-school moms), then we are nearing a bursting bubble. Now they are gold and silver coin buyers and in causal conversation they just can't wait to tell you about what they recently bought and all the reasons why. I have even found several fake silver coins in a friend's collection (they shouldn't have a seam that indicates two sides of a coin were put together). Try throwing a garage sale and several days before you'll have weekend gold speculators looking for jewelry before the garage sale.
In any case, several months ago it was confusing as to whether gold was acting as a risk on or flight to safety asset as it had done both, we realized gold is now a Central Bank easing sentiment indicator as gold has a lot to gain from CB easing (like QE3), which makes today's trade in GLD thus far kind of interesting.
Last week we saw a lot of assets fall including currencies when the Chinese eased and everyone remembered the November globally coordinated easing that started with China with the F_E_D and ECB to follow about an hour later. Needless to say, some of the downside in the risk asset layout indicators came directly from last week when China eased and Bernie testified on the Hill, but didn't allude to any concrete hints of easing to come. Strangely the night before the F_E_D's #2, Janet Yellen had been in the press sounding ultra-dovish as were several other F_O_M_C members, which made Bernie's lack of easing talk very strange indeed, I'm pretty sure Yellen knows what Bernie is thinking, at the time I suspected a good cop/bad cop routine that in effect was the equivalent of "Greenspeak", when Greenspan would talk for hours and at the end no one had any idea what he was thinking.
Any way, after looking at today's interesting trade in GLD I took a little longer perspective view, this isn't a comprehensive look at the longer term in gold, but it's about time we start looking at that soon.
Here's GLD in green today trading WITH the $USD instead of against it as is typically the case. This leads me to believe either there' some tactical arrangement going on or there's some QE/easing sentiment today, I haven't seen anything in the news, but haven't checked all that close either.
The 1 min chart today since the negative at the open has been in line most of the day with a slight negative building is, this could lead to consolidation, a pullback or continue to grow, right now it's pretty minor as GLD passes the a.m. highs.
3 min today, negative on the open and in line on the move up, although 3C should be a bit higher. I noticed there was no positive divergence which leads me to believe (taken with the move against the correlation in the $USD) that there may have been some dovish talk somewhere.
However when looking at the 3 min longer term and not just intraday, the positive divergence on the 5th was a clear set up for a gap higher on the 6th which saw selling in to the gap, since there has been another positive divergence on the 7th/8th and 3 min 3C is nearly in a new leading high.
The 15 min chart shows the strong positive divergence inside the bearish descending triangle (downside continuation pattern that was head faked as usual). I didn't take the trade, but many members did and some made over 200% with calls as I believe that was the biggest 1 day move up in GLD since 2009. The distribution in to the gap up in the red box is pretty clear and GLD formed a sort of bear flag that looks to be breaking to the upside a bit today.
Longer term on the daily, the 150 m.a. has been excellent support and a great buying opportunity over the last several years, we were waiting for that pullback, but the way it pulled back from the August highs didn't look good and we skipped the trade at point "A" as it seemed something had changed. GLD went on to make a massive triangle, when they are this big they are usually tops or bottoms, depending on the preceding trend, this would indicate a top and GLD broke at point "B", but I never like to short the first break as we almost always see a volatility shakeout and I don't like chasing. At point "C" we got the chance to short GLD on a head fake move above some resistance that made for a nearly 215% put trade in about 3 days. At point "D" we had a bearish price consolidation with 3C positive signals making for another 200+% call trade. Note how many head fake moves there were of some consequence just on this chart. While the head fake move on obvious price patterns is common, it is also common for the price pattern to be a real (in this case point "D" bearish) or legitimate pattern-you jut have to watch for the head fake.
Long term 3C on a 6 day chart shows confirmation of GLD's uptrend and then going significantly negative.
MoneyStream shows the same signal on a daily chart.
The daily 3C chart shows the negative divergence at the Aug. highs mentioned above, a positive on the break below the triangle that told us we'd see an upside move, and the head fake move that we shorted from there. Since then the bearish descending triangle with a positive divergence for another 200+% call trade, this time to the upside.
I'm starting to wonder if the F_O_M_C may introduce some easing at this month's meeting, it would send gold higher, but it doesn't necessarily remove the bubble aspect, just kicks the can down the road a bit further.
We'll be watching GLD very carefully over the next week or two in to the F_O_M_C. Something seems a bit off here and may make for a very good trade, it may also adjust our tactical planning with regard to our strategic view.
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