Monday, November 3, 2008

Comex Gold was creeping higher as trading began Sunday evening, but it'll need to hit 743.90 to warrant our rapt attention. Night owls looking for a very low-risk way to get long should consider buying if the futures trace out a pattern like the one shown in the chart. The key to the strategy is an A-B impulse leg that terminates between the two numbered peaks. That would give us a rules-based, "stealth breakout" that is not likely to have registered on the radar of conventional support-and-resistance traders. Alternatively, if gold continues lower, the first Hidden Pivot support we could use for a downside target lies at 712.90.

The December futures need only punch through, then close above, 10.265, a midpoint Hidden Pivot, to signal their readiness for flight to as high as 11.330 over the near term. Sunday night owls should look for support at 9.735, but I wouldn't lean to heavily on this minor pivot, since the pattern that produced it is a little fuzzy. Another way to get long would be to buy-stop 9.875, since a print at that price would be a minor, double break-out: above a previous peak, but also above a minor midpoint pivot. _______ UPDATE: Silver's rally fizzled a tick below the 10.265 trigger price, disappointing bulls but providing a timely and precise opportunity to hedge long-term positions.

I've identified a Hidden Pivot rally target at 1046.25 that should come easily once its midpoint sibling at 982.50 has been exceeded on a closing basis. However, there is also a lesser target at 1013.50 that we should consider if the futures work their way into the range between the two numbers. We'll make 1013.50 our minimum upside objective for now, since its respective midpoint, 964.00, looks like it's dancing with the E-mini this evening.

The Cubes peaked not far below our first target, 33.65, but we can still look to get short if they pop this week to the second, 35.40. If that number is achieved, we'd be bidders for four December 33 puts (QAVXG). You can pay the offer this time, as noted here earlier, since option spreads in this vehicle tend to be pretty tight. As of today, the puts would be a good deal for around 1.50, so you can leave a limit order at that price with your broker. I'll adjust if it looks like put volatility is changing on the way up, so keep your bulletin launcher switched on if you'd like to stay apprised in real time.

I'd suggested monitoring a Hidden Pivot support at 83.33 to determine how much further this correction has to go, but there's another at 83.89 that can serve more immediately as a tripwire. An easy penetration of that number would imply that weakness is likely to persist down to 83.33, at least.