Gold/GLD

Gold as it turns out, is worth a lot; there's a lot on information to be had in the price action of gold, we simply need some movement to collect it (at least additional evidence).

So far Gold futures and GLD look similar to the market update, some short term positive signals and negative signals on the longer term charts which are almost always more important and give a better picture of what smart money is up to.

There are several possibilities to consider with gold, obviously the strongest correlation is not really even the dollar value any more, it's the inflation outlook so in this sense in many or all ways, gold would seem attractive.

From the information gathered so far, it looks probable that other than intraday jiggles or volatility, gold is looking to pullback. The information most useful there is how underlying trade acts on a gold pullback, smart money rarely chases anything higher so just as QE2 when first introduced saw a 4 day pullback allowing smart money to buy on the cheap, we can get similar information on a gold/GLD pullback.

On the more non-conventional side of things, we might find through the underlying trade that the market or aspects of the market have already priced in QE3 as this is the first of 5 LSAP programs the F_E_D has undertaken in which prices were already elevated as QE was announced (all indications point to the price strength being a direct reflection of QE3 anticipation), all other 4 times the F_O_M_C has used non-conventional policy (QE 1, QE 2, Operation Twist, the extension of Operation Twist) market prices have been depressed, therefore the market had something to be excited about and start moving prices higher to discount the unexpected programs; the only exception would be the ACTUAL announcement of QE2, prices were already higher, but that was because Bernie had clearly telegraphed QE2 was coming at Jackson Hole in 2010. However at Jackson Hole pre-announcement, prices were depressed.

So while it is less likely in gold specifically due to inflationary fears, a pullback would give us additional IMPORTANT information that can only be gathered during a move lower. Without getting too far in to the possible reasons why an already discounted QE3 may not be as positive as conventional wisdom would suggest, is the very same reason gold would appreciate, INFLATION. Remember, Bernie said they wanted to foster maximum employment WITHIN THE CONTEXT OF PRICE STABILITY. In other words, the potential conditionality of QE3 is to be found in what it is best known for creating (not jobs), inflation and there's the catch 22 in a nutshell. To put that in to personal perspective, no one wants to chase prices higher and in to bubble territory and have a sudden halt to the asset purchases until inflation cools; this is sort of like flipping houses during the housing boom, prices of homes have appreciated for years, there's no reason to believe it is coming to an end, but you pay way more than a property would normally be worth to flip it and the music stops.

That's a very simple look at only a few aspects of the possibilities on either side, what we want is to see evidence that changes possibilities in to probabilities.

As to gold futures and GLD, they're not too far off from each other, nor the market for that matter.

 YG (Gold mini Futures) 15 min has the same theme that has been seen in most risk assets since Friday.

 I was a bit hesitant to go out to 30 mins. on the Gold Futures chart because I'm interested in the data recently confirming or not confirming the longer charts and signals in place before last Thursday, but since this chart has given effective signals in the recent past, I thought it was worth publishing.

 Shorter term on the 5 min chart there is in fact a positive relative divergence, much like the rest of the market.

 That can be seen in GLD as well on the1 min chart starting late Friday.

 The 5 min chart also shows a similar signal, although I think this reflects more of the attempt to close the market higher on Friday until the US downgrade spoiled the party.

And GLD out to 10 min which seems to be all fairly new enough information post the F_O_M_C.

A decline would be the next area in which important information regarding the bigger outlook market wide can be collected.