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Gold peaked at 875 exactly 35 years ago today (Jan 21 1980)
Next week is FOMC and Options Expiration. Odds are strong for a pullback to begin here in gold at 1306 or the 1322 area.
From a subscriber of GoldTrends --- Evert P.
I have often noticed how your timing cycles will go hand in hand with Option expiration dates. Sometimes the short cycles other times the best dates for the medium cycles.
So i look at what OI we have to give me an idea i.t.o options if we can determine a cycle if it will be a high or a low.
For the Feb series that expire now. I initially pegged the 1250 strike as important and though we should see that as major resistance. But the outside factors were too much and over ran that, which actually adds more fuel to the flames.
1250 call OI - is at 7159. It might still be a factor as the boys can drop it below that if they wish. The next biggie is 1300 strike - oi at 13118.
I don’t see us taking that out , it should be well defended , unless they lose control in which case it might have a further blow-off.
The expiration date is 1/27. So a little later than your 1/19 - 1/22 date on cycles.
Puts not a factor at the moment.
(end of E-Mail) Charts and analysis follows headline news;
S&P Surges As ECB's QE Leaked: Board Proposes €50 Billion In Bond Monetization Per Month
Submitted by Tyler Durden on 01/21/2015
And so with less than 24 hours to go, the ECB has decided to leak its deliberations not only to Merkel and Hollande, but Dow Jones. To wit:
DJ: ECB EXEC BOARD'S QE PROPOSAL CALLS FOR ROUGHLY EUR50B IN BOND BUYS A MONTH - SOURCES
ECB SAID TO PROPOSE QE OF 50 BILLION EUROS A MONTH THROUGH 2016
More as we see it, but if indeed this will be a program without risk-mutualization and conditional and limited burden-sharing, where the hope was that Draghi would "shock and awe" the world with the size of the bond purchasing program instead, €600 billion per year looks decidedly on the low side of any "surprise" announcement where the whisper number was for €1 trillion per year, and if indeed this is the final formulation may result in a substantial disappointment for stocks after the initial kneejerk reaction.
In what is likely an effort to comprehend whether the market is satiated with a mere EUR 50 billion per month in printed money, this morning's leaked ECB QE announcement (due tomorrow) sparked total chaos in FX markets and, as Nanex notes, sending market liquidity to near record lows. This is a problem. With the 'real' volatility event not arriving until tomorrow, everyone has pulled out of the market already... setting the scene for a gappy Swissnado replay tomorrow morning.
USDCAD breaks 1.23 - weakest since April 2009
Unexpected to most, The Bank of Canada cut its benchmark interest rate to 0.75% citing financial stability risks and worried about downside inflation risks. The press release is extremely negative...
*MAGNITUDE OF OIL SHOCK CREATES EXCEPTIONAL UNCERTAINTY: BOC
More Macro Hedge Fund Blow Ups: EUR Reversal Leads To Massive Volume Surge As Stops Hit
Submitted by Tyler Durden on 01/21/2015
Following the initial kneejerk reaction lower in the EURUSD, much as expected, the market appears to have actually given a second thought to the ECB's trial balloon leak, which had zero details on risk-mutualization or burden-sharing, and most importantly about the size of the announcement, which at €50 billion per month is well below the €1 trillion annual run rate which was the high-side whisper number, and then the kneejerk reaction promptly reverse. What happened next is a deja vu from last week, when as the epic surge in EURUSD volume, both in spot and futures, showed that at least one, and likely more, macro hedge funds were just stopped out of EURUSD shorts, as the reversal pounded anyone short the European currency with less than an infinite balance sheet.
30Y Treasury Yield Tumbles To Record Low
Submitted by Tyler Durden on 01/21/2015
It would appear the housing data was not the growth-inspiring 'everything is awesome' facts that we were told about last night. US Treasury 30Y yields have just broken to a new record low 2.3500% handle... The yield curve (2s30s) has cracked lower to its flattest since 2008. As we explained here, this is not unexpected as anticipation of ECB QE means duration scarcity rules.
Oil Producers Currency Collapse Continues, Nigeria's Naira Crashes To Record Low Against Dollar
Submitted by Tyler Durden on 01/21/2015
Having proclaimed it is not Zimbabwe, Nigeria's currency is starting to look a lot like a hyper-inflating mess. After devaluing to a 168 peg in November, the Naira has crashed to 200 / USD today - smashing above the upper peg band of 176 as it appears Nigeria is losing control. The collapse of Oil Producer currencies had abated for a week or two but the last 2 days have seen the Ruble and Naira tumble (even as The USDollar weakens modestly ahead of the ECB QE tomorrow).
Yemen's Rebels Hold US-Backed President "Captive" In His House. Seize Country's Largest Ballistic Missile Base
Submitted by Tyler Durden on 01/21/2015
As reported yesterday, Yemen became the latest foreign policy "success" story of the US after the local minority of Iran-friendly Shi'ite Houthi militiamen stormed, and captured, the presidential palane. At the same the whereabouts of Yemen's US-backed president Abed Rabbo Mansour Hadi were unknown. Moments ago we learned about his current location: according to AP, "two Yemeni presidential advisers say the Shiite rebels who are on a power grab campaign in the capital, Sanaa, are holding the president "captive" at his home, a day after seizing the presidential palace."
Building Permits Slide For 2nd Month, Miss Expectations; Starts Near Cycle Highs
Submitted by Tyler Durden on 01/21/2015
For the 2nd month in a row, Building Permits dropped and missed expectations. The 1.9% MoM drop in December was a notable miss against expectations of a 0.6% rise and left YoY Permits at a mere +1.0% - hovering at the weakest growth since mid 2011. The long-heralded savior of permits - multi-family - tumbled to their lowest since June; with overall permits lower in all regions aside from the "weather-affected" Midwest. Housing Starts rose back near cycle highs (just don't tell KB Homes) beating expectations for the 4th month in a row.
The Next SNB? Goldman Warns Bank Of Japan "At Risk Of Losing Credibility"
Submitted by Tyler Durden on 01/21/2015 - 07:54
"...with the large downward revision to its core CPI outlook, the bank is more or less acknowledging a much lower possibility of achieving the 2% price stability target by around FY2015. Yet, at the press conference following the MPM, Governor Kuroda said he still held the view that 2% could be achieved by around FY2015. Domestic investors have been skeptical of the BOJ’s target from the outset, and now foreign investors are also beginning to question the BOJ’s logic and communication with the market. We believe the mixed signals the BOJ is sending may well serve to further undermine confidence in the bank." - Goldman
Gold Chart
With the news out on the ECB and their QE move, gold has initially dropped due to lower plans than the market had expected. A drop in Canada’s interest rate is another shocker for the financials today and that may have also given gold some slight pressure as it’s a commodity economy. However, the most likely factor is the FOMC meeting next week and short term cycles. Resistance is 1296-1306 and then 1322. Support is 1272-1282 and then 1253-1253-1257 at the moment. Monthly support is now 1222. In summary, a pullback is favored towards 1272-1282 and perhaps we have put in the short term cycle high and the monthly high for January. We still won’t rule out 1322 but that might be kept for the Feb rally.
 
Cycles Chart
The next short term cycle is due to peak by Thursday’s close at the latest. It may have happened today with the touch of the upper momentum line. We can’t rule out a cycle inversion that would cause prices to move higher for another two weeks until the blue cycle on Feb 4th, but odds are 70% that a pullback will begin and will bottom near Feb 3rd (plus or minus 72 hours) just 16 days before the Chinese New Year. And that might be the catalyst for the next push higher in gold. Any pullbacks to 1247-1255 or 1262-1272 should find support.
Silver
Silver has reached the 1850 target (we hit 1847 in spot) and odds favor this is where a pullback is most likely. Support is 1716-1768 and resistance is 1838-1858. If silver pulls back under 17 into the 1st week of Feb, it should be considered a buy.
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