Gold Futures Look Interesting

Thus far Gold has been the flight to safety trade or you could say it has been trading opposite the market, for a while we were looking at gold rallies (recently) as sentiment that the F_E_D taper was to be pushed back and declines that the market feared the taper sooner than later, but now even with the new F_E_D nominee up in the air and Bennie likely staying on longer than thought, there's some uncertainty about a taper date that has been widely held to start September, but in my view, I believe the F_E_D and Bennie want a new chairman-woman (Janet Yellen perhaps) to lead the effort to unwind the F_E_D's unprecedented level of policy accommodation since late 2008.

Entering F)E)D policy is the easy part, unwinding policy, normalizing the balance sheet and raising rates is the hard part, it looks like new leadership will lead that charge, that's the VERY distinct feeling I get, especially when looking at the timeline of how the events (what I called "Slow boiling the frog") came together to lead the F_E_D to the point in which they could go from introducing QE3 to letting the market know that policy accommodation is about to end and all of this in under a year.

In any case, gold in my view already had a cycle started, phase 1 accumulation, however the events of the last 24-48 hours seems to have changed fundamentals and the war premium in the market has been discounted again. Still, once Wall St. invests in a cycle, they rarely let it fail. In this manner I think Gold will go higher and that's probably why GDX looks so good. I would not make any assumptions about silver beyond the last major update last week, I would not expect arbitrarily that it will mirror gold, I put out pretty extensive analysis of silver, I'd check that out. I will update Silver to reflect short term changes, but I think the thrust of the longer term remains intact.

Gold

 1 min gold futures with a large intraday positive divergence.

 In the middle of the chart is the accumulation zone I mentioned, there's no distribution, so the move was largely a reaction to fundamental events, not a closing out of the new cycle as far as I can tell, I mentioned this in earlier updates during market hours today, I believe to the right we are seeing a new divergence, since the stage 1 accumulation is largely complete, I think this would simply be tactical tweaking.

The 30 min chart shows the accumulation of the head fake move as well to the right of the middle of the chart, again no distribution of any kind leading us lower so I think the accumulated positions are still in place, they may be averaging down at a better price point which is fine when you are controlling the cycle, note the leading positive today or tonight.

I haven't been impressed by short term GLD signals this week yet, but I have a feeling that's all about to change so we may very well look at some GLD long positions and maybe SLV, I would just warn that if we do, be careful not to over-correlate your portfolio with GLD, SLV and GDX or NUGT, you have 3 positions all highly correlated, my way of dealing with that was to look at GDX and GLD as one trade for risk management purposes, I think if we get confirmation signals, that might be the best approach to spread out relative performance, but to keep your portfolio from having too much PM related exposure.

What we need now is strong GLD confirmation, as soon as we get that, we'll look for a tactical entry with low risk. I have been patient with GLD, last week (Friday) I declared, "No GLD/SLV trades for me", not because I didn't believe in the cycle, but the charts didn't look right and this week we found out why.

As always, a sharp edge in the market and patience is a deadly combination for a wolf stalking its prey.