Saturday, August 1     Published daily Receive trading 'touts' free
Thought for Today

A Wake-Up Call in Gold

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Yesterday’s gold tout identified some key technical levels to monitor for early signs of the next big move. I raised the question of why gold’s nearly relentless slide stopped just short of a key downside target. A possible answer, supplied by an astute subscriber, may lie in COT data that show commercial traders to have dramatically reduced their short positions recently. This development may or may not turn gold around, but it deserves our close attention nonetheless. For more on this, check out today’s tout for Comex Gold.

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$ESU15 – September E-Mini S&P (Last:2102.00)

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$GCQ15 – August Gold (Last:1088.00)

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Gold's long bear market tendsI’ve been bearish on gold for so long that my successively lower targets have become almost perfunctory. Lately, I’ve focused on a ‘Hidden Pivot’ target at $817, the attainment of which would presumably wash out the last of the die-hard bulls, clearing the way for a resumption of the long-term bull market. Now, however, I am obliged to consider an alternative possibility — i.e., an explosive move without the washout.  Although I lack the imagination to envision such world-shaking news as might cause this to occur, I credit a relatively recent Rick’s Picks subscriber, Michael Gibbons, for jarring me awake.

Gibbons is a market-timer of legend himself, with a high-end service that offers precise, timely trading guidance for 30 vehicles, including commodities, index futures, ETFs, stocks and options.  His take on gold, based on the latest Commitment of Traders (COT) report, is that a potentially major move may be close at hand. It turns out that commercial traders have been drastically reducing their short-gold positions, presumably in anticipation of a trend change. Although the commercials are never net-long gold contracts, they are significantly less short than they’ve been in quite a while. And that is good news for gold investors, since, as Michael points out, these guys are seldom wrong at important turning points. The last time they had it exactly right was in May, when they were loaded for bear, so to speak, a day ahead of gold’s steep plunge from a rally spike to 1232 on May 18.  The August Comex contract has fallen $160 since, or about 13%.

Over that time, commercial traders have covered a substantial portion of the short positions they held a few months ago. That could explain why gold has remained relatively buoyant during the last two weeks, hovering above a correction target of mine at 1059 without quite being able to reach it.  According to Michael, the dramatic lightening of short positions by commercial traders has made a plunge in gold unlikely for now, if not impossible. He further notes that gold could still take another leg down regardless of how the commercials are positioned.

For my part, no longer lulled comatose by gold’s tiresome dirge, I will be more intently focused on the intraday charts; for they cannot but divulge the subtle beginnings of an important turn, assuming it comes. Stay tuned if you care!

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$ADU15 – September Aussie Dollar (Last:0.7320)

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Aussie dollar is closingThe Australian dollar’s steep slide, now entering its fifth year, looks like it has enough momentum to reach 0.6773.  Although that might be good news for exporters and tourists, it would put the country’s economy under even more strain than it has experienced thus far. Notice, however, that the futures are nearing a Hidden Pivot support at 0.7118 that could brake the fall and possibly even reverse it. It will therefore be a promising spot to try bottom-fishing, assuming it is reached. Currency traders should position themselves accordingly, using the pivot for now as a minimum downside objective. Please note as well that a retracement back up to p=0.7462 would be short-able ‘mechanically’ with a 0.7692 stop. A ‘camouflage’ entry could be used to pare the entry risk by as much as 90%.

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$+JNK – High-Yield Bond ETF (Last:37.82)

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Junk is finally movingThis flying pig is finally starting to move our way. We hold four December 19 34 puts @ 0.40 and have an open order to short four 32-strike puts against them for the same price. Because the puts we are long are perking up slightly, it could encourage a bid in those that we have sought to sell. An honest bid could materialize if the underlying falls to the 37.47 target shown. In any case, continue to offer the 32 puts short. You can also bid 0.10 for the spread, good-till-canceled, or try to leg it on at that price, since that would be like getting 20-to-1 odds against the possible crash of junk bonds between now and the end of 2015.  Junk paper would have to fall hard for our gambit to pay off, but a lot can happen between now and 2016.  Sooner or later, though, I am certain investors will be reminded yet again of why they call it “junk”.

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$SIU15 – September Silver (Last:14.530)

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$GDXJ – Junior Gold Miner ETF (Last:19.31)

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$CLU15 – September Crude (Last:48.81)

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The laser-like accuracy of Rick Ackerman’s forecasts is well known in the trading world, where his Hidden Pivot Method has achieved cult status. Rick’s proprietary trading/forecasting system is easy to learn, probably because he majored in English, not rocket science. Just one simple but powerful trick -- managing the risk of an ongoing trade with stop-losses based on ‘impulse legs’ – can be grasped in three minutes and put to profitable use immediately. Quite a few of his students will tell you that using ‘impulsive stops’ has paid for the course many times over.

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