Andrew Hart's  Instablog

On just about any time frame the SPDR Gold (GLD) is showing a classic technical breakout, 60 Minute, Daily and Weekly - you can see the classic 'breakout' system (Acceleration Bands)  applied to each time frame below.  Late on you'll see why this move may be better to fade in the short-term, although, the technicals are showing trend strength.

GLD Weekly - Acceleration Bands

GLD Daily - Acceleration Bands

GLD Hourly - Acceleration Bands

It's especially intriguing that this occurs the day before the FOMC announcement - was there a leak of some sort or is this just a risky bet?  We've seen similar action ahead of the Fed before...

It's no secret that traders have speculated on economic reports being leaked, most recently the ISM number, or even the acquisition of Sepracor (SEPR) being leaked.  In most cases LiveVolPro is my tool of choice for discovering these types of situations.  Just six weeks ago (the last FOMC meeting) I pointed out a large bond trade placed 90 minutes ahead of the announcement.

The large trade was placed on iShares 20+ YR Treasury (TLT) and was presumably a bearish leaning straddle, based on our analysis.  The straddle was placed on January strikes, however, at this time the trade is at a marginal loss.  This brings up age old [rhetorical] question, what is smart money or dumb money...and who's better to follow?  At any rate, check out the TLT trade status if you have time, but let's get back to the Gold breakout ahead of the Fed.

After exiting the last leg of a GLD call position last Tuesday, which I'd held for a couple of weeks (ETF Options Trader), Tuesday's Gold (GLD) breakout was of high interest.   Once again, there's another significant move ahead of the Fed Wednesday's announcement-GLD hit all-time highs after one of the largest daily percentage gains in 2009.  In my view, this move was overdone, thought it's not worth betting against just yet.  For short-term technical traders you'll notice that most of these breakouts are followed by a settling period or a minor pullback.  It will likely be different now.  With jobs numbers or Fed speak we are almost assured that Tuesday's action will be analyzed and a strong move will ensue-a correction or further breakout.  You might recall my associate Bob Lang, who predicted gold would be up 20% this year to $1200/oz ... so there's likely more upside by year end.

Option traders were net bullish on Tuesday (4^th highest day for GLD options volume on-record) with roughly 3:1 calls to puts.  I took a look back at the top five days for option volume on GLD and there seems to be a dependable trend in place- we're at a short-term top in GLD.  The chart shows the most active days for GLD options with 5 and 10 day performance after option volume spikes.  Note that in each instance of a record options activity we saw losses 5 days after and in 4/5 instances we saw losses 10 days after the spike.

In my view, this shows a clear and present trend - Gold (GLD) is likely to decline for the remainder of this week and probably next week too.  That said, the longer term weekly trend is too strong to fight so the probable pullback on the horizon should be another great entry for longer-term gold buyers.