Thursday, April 30, 2009

The failure of the E-Mini S&Ps to reach a drum-rolled target at 892.75 is about as likely at this point as an orchid bloom in the Arctic, so let's simply enjoy the show. The real issue is what happens after that number -- shortable, but see my specific advice -- is reached, since a close above it would suggest bulls may be just starting to warm up.

Our bullish position includes four Sep 84 (DAVIF) -May 84 calendar spreads for 3.45 and a September 76 put for 1.49. The spread is currently trading for around 4.00, yielding a theoretical gain of $220, but we can probably do better, so let it ride. If the Diamonds hit 84 this Friday, we'll try to exit for around 4.50. The timing would favor us, since it's going to dawn on traders by then that May options expire on the earliest possible date, the 15th. Come Monday, May option premium will start to melt away fast.

The two-peaks rule applies to Silver Wheaton just as it would any other trading vehicle. In this regard, notice how yesterday's promising rally stopped just a hair short of the external peak whose breach would have turned the 15-minute chart bullish. We needn't infer weakness in this instance; rather, buyers evidently were reluctant to move decisively because bullion prices were retreating. The chart yields a potentially excellent opportunity for buyers Thursday morning, since a mere 21-cent thrust would surpass three prior peaks -- one of them external. However, if the stock continues to misbehave, it will open on a gap above the three peaks, turning "everyone" too bullish for camouflage. In any event, and just to be in the game, let's bid 0.65 today for four ____ calls.

A rally to at least at _____ still looks like a lead-pipe cinch, but the target is probably too well advertised by now to short with a microtight stop-loss. Since it's conceivable that the mass psychosis driving this bear rally will not abate merely because it has encountered a Hidden Pivot with some stopping power, we should have a back-up target in mind. For this purpose we shall use ____, a Hidden Pivot, and it should be considered a lock-up if the futures close above ____ on the same day they have finally achieved it. I don't expect that to happen, but if it does, bears shouldn't try to resist the tide.

Although it wouldn't take much to turn June Gold's daily chart robustly bullish, the futures continue to tease and titillate without delivering the goods. They are obviously marking time, too feisty to be knocked to the ground but not yet ready for the inevitable assault on $1000. We saw some of this wish-washyness yesterday morning during the weekly webinar for graduates of the Hidden Pivot course. The Comex June contract was inching toward a 905.00 rally target, evidently lacking the power to reach a more ambitious target at 914.50 that would have turned the hourly chart unambiguously bullish. Alas, the rally died at 904.00, a dollar beneath our target, sending the futures into a $10 dive that was all too typical of recent price action.   So what, exactly, would it take to turn June Gold into a screaming buy?  Very simply, a rally that traverses the gap between 919.70 to 935.80 without taking a breather lasting more than a day. According to our technical rules, that would create a bullish impulse leg of daily-chart degree, effectively clinching a follow-through to at least 967.30. Moreover, that last number is a "midpoint" Hidden Pivot, and if it were to be breached on a closing basis for two consecutive days, a further surge to at least 1069.60 would become an odds-on bet. Silver More Bullish This sequence of events is of course speculative at this point, and we needn't get excited about it until such time as the June contract musters a similar feat on the lesser charts, surpassing the 914.50 benchmark noted above.  Meanwhile, and interestingly, May Silver's daily chart is slightly more bullish than Gold's. We cannot say whether this means silver is likely to outperform gold during the next bull cycle, but it is reassuring on the question of bullion's