It is interesting that after the BAC-Fed-Pimco story came out, gold barely flinched. Shouldn't gold have been the beneficary of some flight to safety? Meanwhile, the DXY (Dollar Index) climbed from 77.85 to 78.20 on the news, suggesting that it was the "go-to" market in reaction to negative news about the banks.
Whether or not this reaction is a one-time event, we will have to see, but it is nonetheless something for us to keep in mind right now. The most meaningful feature of the enclosed daily chart of the SPDR Gold Shares (NYSE: GLD) is the cluster of days from Oct 13 to Oct 19 (today) which exhibit an "Island Cluster" downside reversal. This cluster of days started with a gap up and finished with today's gap down, leaving the cluster unattached and dangling by itself -- a potentially very negative formation.
Inability of the GLD to claw higher to fill today's gap-down (133.00) in the hours immediately ahead will increase the likelihood of downside continuation to 128.40-126.25 next.