Gold Short Term Calls Trade Idea Follow Up

Yesterday's short term (speculative) GLD June 19 $115 Calls opened yesterday, Trade Idea-SPECULATIVE GLD Long are doing a lot better this morning than I would have expected on such a move in the $USD up after the CPI data was released...

In fact,

The position is only down about -3.81% and with a fill/cost of $2.10 and the current bid sitting at $2.04 and ask at $2.07, meaning with the next transaction going through it will be that much closer to breakeven.

Yesterday we saw unusual signals with sharp, intense positive divergences but over a short period of time which is why they are considered a short term/speculative trade.

 GLD 2 min with a sharp leading positive divergence which mostly formed yesterday.

GLD 5 min with a more impressive leading divergence on an institutional intraday timeframe, again a leading positive divergence that is almost entirely formed yesterday.

Even a 10 min chart with a positive divergence mostly formed yesterday.

Once again, I believe someone on Wall Street or a lot of someone's were privy to this morning's CPI data release.

You may be asking how that makes sense being the $USD shot up and our trade idea with gold has been based on entering a swing short in anticipation of the $USD shooting up as it continues it's counter trend bounce rally- the kind of moves that occur in a downtrend, but are some of the strongest rallies you'll see because they need to overcome the doubt cast by the downtrend, thus their name, "counter trend rally".

The divergences and the fact gold has not sunk much lower today only makes sense in one scenario, the same scenario I just finished posting and making a case for... the leak of this morning's hot CPI print.

Again you may ask, how that makes sense if gold "should" move down on $USD up.

Giving further credibility to my theory and evidence that the CPI data was leaked, is the gold divergences yesterday and the gold price action today. NORMALLY I'D EXPECT GOLD LOWER ON A STRONGER $USD, HOWEVER THERE'S ONE SCENARIO IN WHICH THIS WOULD NOT BE TRUE...

  INCREASED INFLATION EXPECTATIONS!

Gold is typically bought as an inflationary hedge, but it's usually bought in front of inflation, meaning on inflation expectations rising, well before actual inflation hits which is why gold is holding together instead of breaking down today, because the CPI print was for increased inflation expectations which also happens to be one of the conditions the F_E_D must feel good about, that inflation is moving in the right direction (up) before they'll hike rates. They don't have to see inflation at their 2% target or even moving toward it, they simply need to be able to say that they "FEEL" inflation will move toward their long run goal of 2%.

Thus once again it seems like there's not only a CPI leak, but a F_E_D hike (June) leak as well. In any other scenario with the $USD up gold would almost certainly be down today, but with increased inflation expectations led by a hot CPI print this morning, gold is holding up. \

More evidence that yesterday's sudden and very sharp positive divergence in GLD with gold holding up in the face of a stronger $USD today, pointing to the CPI data having been leaked sometime yesterday.

The 15 min GLD chart is still very ugly and negative and I still feel that a move higher in gold as we have been waiting on will likely set up a nice swing short in gold before it moves lower and creates a longer term trend long which should coincide with further increased inflation expectations which should also make it much easier for the F_E_D to hike rates sooner than later. I STILL THINK A JUNE RATE HIKE HAS BETTER THAN 50/50 PROBABILITIES, even though the minutes leaned toward them not hiking in June, THEY DID NOT EXPLICITLY RULE IT OUT AND THEY DID SHOOT DOWN A 1 MEETING WARNING BEFORE A RATE HIKE IDEA.

It has long been my view that the F_E_D is boxed in and they are more afraid of something they have not given voice to than they are of the further damage a rate hike will do to an already soft economy. Thus it has been my view that like any major corporation getting ready to start a major undertaking , is NOT doing it on the fly or off the cuff, but rather has had the exact date planned out for sometime. How much more important in a  F_E_D rate hike than any project any Fortune 500 company could undertake? And how likely is it that any major project a Fortune 500 company would undertake would be "on the fly" and not well planned out in advance with multiple contingency plans in place?

Yes, I believe the F_E_D has known for quite some time exactly when they were going to hike and I think it is June. The F_E_D's own Bullard had mentioned a F_E_D rate hike in June well over a year ago, giving the exact date in a little known radio interview as well as what the F_E_D Funds would be at  by the end of 2015. I don't think that was off the cuff either. Just think, he would have had to accurately predict when the end of QE 3 would take place and when the rate hike would be long in advance while QE 3 was still very much underway and we were being told that it too was going to be ended on the fly. I don't buy it for a minute.

For now I'm not changing anything with the GLD call position, but will be looking for a move higher to exit it and enter a new put position when the signals are lining up just as yesterday's did.