Monday, December 15, 2008

I've reproduced a 240-minute chart that shows why a target at 140^12.5 is important. Bonds are obviously a crucial bellwether right now for once-in-a-century nuttiness, and nothing could be nuttier than historically low yields that fail to take into account the reality that the United States is itself bankrupt. Will the zany appeal of risk without reward end when our target is hit? I don't know, but we can be fairly certain that the target, at least, will be reached. If it is decisively penetrated as well, we'd infer that the major trends of the moment -- stocks down, dollar up, bullion erratic but buoyant -- are likely to continue. _______ UPDATE: The Bonds have topped so far at 140^12.5, the exact price forecast last weekend when they were sitting below 135. If you shorted more than one contract at the high, you could have booked a partial profit of as much as $750 per contract, since the futures pulled back to 139^19.5 after kissing my number. If you hold a single contract, use a break-even stop-loss and switch to a trailing stop of at least 16 ticks once 139^12 is touched.

The bullish impulse leg that I flagged here Thursday night when the Cubes were getting decimated is capable of catapulting them as high as 32.35 over the near term -- a leap of nearly 10 percent. However, because the danger of a market collapse is at an extreme now, I would rather attempt shorting at the c-d midpoint, 30.41, than try to leverage the upside. Accordingly, we'll look to buy two January 30 puts (QAVMD) if and when 30.41 is reached; they should be trading for around 1.64. Although that would be a fair price to pay for them, I'm not going to suggest parking a limit order with your broker since that could cause you to miss the trade. Stop yourself out if the puts trade 0.10 below where bought. _______ UPDATE: The trade was a non-starter, since the Cubes opened on weakness and never traded higher than 29.76.

The 876.20 projection has an analog in a smaller pattern pointing to 835.20 over the very near term (see chart). As of 6:30 p.m. Sunday, the 826.40 midpoint resistance associated with the lower target had already been surpassed, suggesting that a minimum 835.20 is in-the-bag. It would take an easy move past this number, however, to clinch the remaining, expected push to 876.20. _______ UPDATE: The futures refreshed the bull trend with a thrust to 843.70, then settled back to spend the rest of the day pussyfooting with the 835.20 pivot, which has become support.

Like Gold, Silver is acting like it wants to move higher over the near term. A minor-trend target equivalent to the one I've identified in February Gold lies at 10.515, a Hidden Pivot that can serve as a minimum upside target for Sunday night/Monday morning. The bigger-picture target lies at 11.005, and odds of the futures getting there by no later than Tuesday morning look excellent.

If precious metals are about to take off in the way anticipated in the current touts for gold and silver, then the Dollar Index should register corresponding weakness by taking out the key low at 83.10 recorded on October 30. Such a move would have even more-bearish implications if it should also exceed the 80.75 low of 10/14 as well without an intervening a-b-c rally on the 60-minute chart.