Gold reaches first short term resistance at 1222

"What Changed?" - The Simple Reason for Yesterday's Sharp Selloff in Stocks
Submitted by Tyler Durden on 10/08/2014

"The new information on global slowing may be less important than the realization that policymakers have few tools to deal with any kind of slowing, let alone a major shock. G3 10yr government rates now average 1.27, within 10bps of the all-time pre-tapering low of 2013 (Figure 1). So if the last 100bps of rate reduction did not stimulate global growth, it does not seem likely that another 20-30bps or so in the presence of negative demand shocks will do the trick. The market takeaway from their comments is that the US economy is not strong enough to stand on its own, leaving little hope for the rest of the world, which is already slowing. Moreover since investors and business do not have particular confidence that the policy response will be effective, any upgrading of the risk of negative shocks raises the probability that we may be put into a zone to which there is no adequate response."

Markets in Turmoil Update
Submitted by Tyler Durden on 10/08/2014 -

Buy the dip traders are absent as markets everywhere are in turmoil. Commodities are sliding with WTI plunging (almost a bear market from June highs) and copper crumbling. The USD is slightly lower (3rd day in a row). Treasury yields are slightly lower. But it is stocks that are in turmoil most as the Dow nears unchanged year-to-date. After the dramatic ramp off the lows last week, stocks have entirely round tripped and then some to fresh cycle lows, led by Trannies and Small caps. VIX is back over 18. In Europe, stocks tanked once again with DAX closing below 9,000 for the first time this year.

Fed's Lacker Slams Fed For "Inappropriate" Bond-Buying, "Distorting Markets & Undermining Independence"
Submitted by Tyler Durden on 10/08/2014 -

Modern central banks enjoy extraordinary independence, typically operating free from political interference. Central bank actions that alter the allocation of credit blur those boundaries and endanger the stability the Fed was designed to ensure. Such interference in the allocation of credit is an inappropriate use of the central bank’s asset portfolio. It is not necessary for conducting monetary policy, and it involves distributional choices that should be made through the democratic process and carried out by fiscal authorities, not at the discretion of an independent central bank.

Russia Central Banks Scrambles to Halt Plunging Ruble, Spends Over $2 Billion in Last Three Days As Inflation Soars
Submitted by Tyler Durden on 10/08/2014 -

After stoically ignoring the impact of its tumbling currency on the domestic economy (and as a reminder, Japan would kill for a currency collapse of this magnitude: just think of the "economic renaissance" that would result if only Abenomics was right about killing your currency leading to growth... which it isn't), the Kremlin is finally starting to feel the pinch leading to the biggest central bank intervention in FX markets since the start of the Ukraine campaign, buying Rubles for a third consecutive day at an amount of over $2 billion, with $1.75 billion purchased in the first two days of the current intervention attempt, and another $420 million in foreign currencies sold overnight according to Bank of Russia data.

Gold Chart
On an hourly basis we are still in a downtrend. The weekly reversal at 1222 is now hourly resistance also. The bounce from the 1182 low was pretty much exactly at that level and price has sold off since that high today. We need closes above 1213 in order to get our 1st neutralization of the downtrend. First support today is 1202-1205 and resistance is 1222-1225. The thing to also watch for is for the blue 89 hour average to cross the green 200 hour average.



Gold chart - 4hours
IF we look at the pattern from this year’s high odds favor we have entered the 5th and final wave down in gold either in March or in July. We have reached the bottom of the yearly channel interestingly at the 1180 area which as most know is the 2013 low from June and December. That would form a triple bottom and expect to hear that from all the technicians. But it is a market myth. Triple bottoms are almost always broken---about 85 to 90% of the time. The fake out is they usually provide stronger and longer reactions higher. Most often, they usually get broken. Sometimes it takes a while, like when we lost the 1520 area in gold in 2013. That took a long time but it eventually gave way. Odds favor we’ve made the medium term low. Final support is 1155-1172. If we break that, then odds favor we’re heading for 900-1060 gold.



Gold Cycles
It looks like we have made the medium term low within the green standard deviation bands of the cycle turn week (Sept 23rd – plus or minus 2.5 weeks) and we’re getting our first reaction of short covering. The most important factor is that the blue cycle is providing the low. That is the rotation we need (blue cycle lows) in order for gold to have bullish cycle activity. It takes more than one as inversions have been here with us for over a year. Odds do favor we’ve made a medium term low. Keep in mind that there are only two things in markets. Numbers and opinion. We all know the track record of opinion for the last few years. Numbers provide odds, but not absolutes. There are no absolutes in markets.