Over the last two days the 50 day moving average held, the trend followers pounced and the shorts ran for cover AGAIN. Those poor folks can't catch a break. At least not for more than a day or two.

This rally has started exactly like the last three...light volume the first day...a little more the next and then off to the races once the coast is clear. We'll see if tomorrow follows the trend.

The 1060 level once again proved important as it acted as resistance this morning once the rally touched it. So that level, along with the September highs are the two areas I'm focused on. So far the trend is still up.

Gold broke out to new all time highs today taking the popular GLD with it. This is definitely the biggest news of the day and deserves any attention it gets. Everyone's asking what does it mean?

In this world of momentum trading it means one thing....higher gold prices. Traders will now jump all over GLD as it has activated an inverse H&S pattern with its latest move. The goal will be the target of the pattern, roughly $130 on GLD or $1,300 in the price of the metal itself. Whether it eventually makes it or not is irrelevant. The point is, I believe gold now becomes a target for the momentum trade.

People will say it's because of the dollar, inflation concerns, etc. I don't buy it. If gold begins a rapid move up now, it's all about technicals and momentum, period. 

However, be aware that this move could fail. If the central banks believe that higher gold prices will "unanchor inflation expectations", watch out. They'll go after it like my dog goes after cat food...with relentless vigor! (I don't know why my dog loves cat food. She just does) 

I'm serious about this. They're paying attention. Inflation expectations is one thing that could put pressure on them to raise rates sooner than they'd like. So get familiar with that term. It's very important to the Fed. 

So tonight the reflation trade lives to fight another day. I can hardly wait.