Monday, October 27, 2008

Gold has taken a sharp bounce from just above a Hidden Pivot support at 676 that was broached in the chat room on Friday. The fact that the low did not attain the pivot, and that the subsequent rally has created a bullish impulse leg on the hourly chart, is encouraging, since it hints that we may be witnessing the start of a rally more enduring than others that have occurred in a long while. If so, any rallies that occur over the next few days should create bullish impulse legs of minor degree, at least. Keep in mind, however, that the futures would need to hit 859.20 this week to turn the daily chart decisively bullish.

We'll stick with the 712.00 target given here earlier, since it looks unavoidable on the weekly chart. In the meantime, although the market remains capable on any given day of tricking Larry Kudlow and his benighted flock into thinking something encouraging is going on, we'll benchmark 931.25 as the place where we might condescend to show an interest. That is where, from a Hidden Pivot perspective, a short squeeze worthy of the name would announce itself to us. _______ UPDATE: The E-Mini S&P has rallied the equivalent of 600 Dow points since bottoming at 825.00 overnight. The interesting and important thing to note about the rally, at least from a Hidden Pivot standpoint, is that it was little more than noise, having failed to exceed Friday's peak, or, on the hourly chart, the requisite two prior peaks we require to signal an impulsive thrust. The move has impulsiveness on the 15-minute chart, for sure, and that is why we need to be careful about where to short it. But the signs so far suggest impotence.

The sharp rally off Friday's lows will qualify as just another garden-variety fake unless the Cubes can get past 31.09 today or tomorrow. However, if they continue on their inexorable dirge lower, a Hidden Pivot at 26.75 could provide us with an appealing opportunity to attempt bottom-fishing. For the time being, that number can serve a a minimum downside objective. Here's another that I think will be hit in time -- perhaps sooner than some might imagine: 21.70. Keep it in the back of your mind, since it may prove useful. _______ UPDATE: The failure of today's superficially impressive rally to surpass 31.09 (the actual high was 30.20) kept us from being fooled by it. On the hourly chart, the short-squeeze never surpassed even a single prior peak before the buying collapsed, as we'd expected it would.

I've projected upside over the intermediate term to at least 92 because that's where visually obvious resistance would seem to demand a test. But using Hidden Pivots, it's possible to project the shorter-term with greater precision. Specifically, a close above a midpoint resistance at 86.79 would telegraph more strength to at least 87.92. _______ UPDATE: DXY got short-squeezed overnight, apexing so far at 87.86 before retreating with the tide. That is just 0.06 points from the 87.92 target given above -- close enough that we should consider it fulfilled. After a seemly consolidation in this vehicle, we'll be looking for the little monster to continue on its way to visually obvious resistance near 92.