QuEstionable rumor

Trading near unchanged for the greater part of the morning, gold rallied 7 bucks in about a minute. A rumor that today's Fed announcement would involve hints of QE3 got people excited, as it should were it to have had any merit. I have noticed (though I believe the last reaction was pretty much null) that even if there is fairly bullish news, traders tend to sell gold after the announcement. Buy the rumor sell the event I suppose. Today's drop, while not precipitous from the outset began to really pick up momentum. 

The Fed announcement, which was made a little bit after 215 last time was actually made early today. So not only do we tend to be wrong about what the Fed will say, we can also be fooled about when they'll say it. In all seriousness, if you have a position on, its worth being by your computer a few minutes before the announcement. Why such a rumor would get out, or how it is possible that anyone with any inside knowledge would spread such a rumor is beyond me. But what is even more beyond me, (and I recognize I have hindsight here, but I have said this before) is why the Fed would ever make such a move now. Without anymore room to lower interest rates, and an increasingly small bag of tools left, it would seem that the Fed would probably rather wait until something got really bad, before it broke out the big guns.

Pre-announcement, Gold, which has been getting trashed like no other of late, was trading 1663. It then continued lower coming into the 1636 level, which is the 61.8% Fib retracement number (a number traders watch closely). As would be customary, bids came in at this level, pushing gold back into the low 40s, before it broke 36, trading as low as 1625.5. I thought we had a shot at 1617 (the approximate 200 DMA in gold) but apparently the selling had reached a temporary climax. we ended the session around 1634.

3 quick noteworthy points:

1) Dennis Gartman has liquidated his personal holdings in gold. This is no reason for hitting the panic button, but so far (very short term) he has been right, and the fact that gold has under-performed so much of late must keep us short term bearish. To put it simply, it just doesn't seem like anyone wants to buy gold (though the exception is there has been persistent demand for the physical... particularly from India of late)

2) The S&P closed below 1225. Last time we came tumbling down, the S&P was unable to make a close above 1225, which signaled a downward move. A close below 1225 tomorrow would be very bearish.

3) And 3 is less of a point, but do you ever wonder if maybe we haven't grown accustomed to Angela Merkel the way we should in America? Everytime she says something negative, like today, when the pop from the QE rumor halted post her comment they would not raise upper limits on the bailout fund, we sell off. While I am no German political expert, it would seem to me that Merkel uses the public sphere to help her gain leverage in negotiating. She always seems to say "no" to new proposals putting a damper on short term euphoria. But wouldn't it make sense that she's just doing that as a base position from which to make concessions such that some less extreme version of whatever is on the table gets done? Fool me once... Fool me two times... It feels like we are all fooling ourselves constantly and not learning from the same old tactics. No wonder Merkel says the things she says.... we actually keep listening!

As a final note, my "buy the dip in the Vixx" was looking pretty awful today though it stormed back as the vixx closed only slightly lower today. As stated in my second point, A close below 1225 tomorrow should definitely have that trade in the black.