Tuesday, January 20, 2009

The futures have earned a green light to at least 12.585, a Hidden Pivot, but they've been taking their sweet time getting there. There is a second bullish pattern at work as well, and it projects to 11.985. Because the sibling midpoint of this resistance, 11.155, has already been exceeded, odds early Tuesday morning appeared to favor the bulls. For night owls, the most appealing place to try bottom-fishing would be at 10.970, using a stop-loss as tight as three ticks. _______ UPDATE: Silver has climbed higher as expected, but the bounce came off a low at 10.920 that was five cents below where we'd looked to get in. The rally targets given above remain valid, although there is another at 11.950 that is equivalent to the one at 868.40 that I've identified in Gold.

A midpoint HP resistance at 8272 is equivalent to the bullish trigger point flagged in the E-Mini S&P. If the futures were to break decisively above it (i.e., exceed it by 6-8 points), that would telegraph more upside to as high as 8438 over the near term. Shorts can be attempted at 8270 with a stop-loss as tight as 8277, but you'll be on your own if the order fills.

If another selling panic develops, try bottom-fishing at 130^05 with a stop-loss as tight as 130^01. Switch to a 5-tick trailing stop on a bounce touching 130^22, and use 131^06 as a minimum upside objective. _______ UPDATE: A downtrend that has been relentless made short work of our stop-loss, producing a trading loss of about $132.

There are no clear benchmarks to gauge the staying power of Friday's sharp rally, although it looked like it would continue to at least 851.80 before encountering even mild resistance. This relegates a 766.60 downside target to the back burner for now, but please note that it will remain valid in theory until such time as the futures print at 892.10, a tick above the point 'C' high shown in the chart. _______ UPDATE: Shortly before 2 a.m. Tuesday, the futures were trading 829.60, needing only a pop above 834.80 to put bulls back in charge. Failing that, or perhaps in advance of it, the most promising place to attempt bottom-fishing with a very tight stop-loss appeared to be 822.20, a Hidden Pivot support. _______ FURTHER UPDATE: Gold had quite a rally overnight, although the so-far $38 blitzkrieg came off a low at 823.30 -- $1.10 above where I'd suggested trying to get long. The spree looked like it was good for at least 868.40, a Hidden Pivot that seemed likely to show some stopping power.

Wild, whacky rallies are not necessarily bullish, especially when they can't even make it to our targets. Thursday/Friday's deftly orchestrated short-squeeze went no higher than 857.75, well shy of the 864.75 target that had been our price objective as the week drew to a close. Under the circumstances, it's probably a good time to mention a very bearish target at 675.50, a Hidden Pivot support shown in the chart. The midpoint associated with it lies at 809.00 (my minimum downside objective at the moment), and we'd infer the lower number is likely to be reached if the futures close beneath the midpoint for two consecutive bars on the weekly chart. Initially, though, 809.00 looks like it will be a great place to play for a bounce, so keep your bulletin launcher switched on if you'd like to be apprised in real time if and when the opportunity arises. ______ UPDATE: The futures subsequently got short-squeezed to 865.75, one point above our target, but bears kept their cool and the tide of hysteria quickly receded. (Note: If you shorted there on your own initiative with a tight stop-loss, you could have booked a one-day profit of as much as $1600 per contract, covering at the subsequent low, 832.50.) As of 1:30 a.m. Tuesday, a so-far weak bounce threatened to goose the bears once again by reaching 852.25, a midpoint pivot. If it's exceeded, we'd be forced to concede that more upside over the near term to 872.00 is not merely possible, but likely.