With the G-20 meeting in Pittsburgh just two weeks off, we didn’t expect gold’s widely anticipated push past $1000 to be a piece of cake. Indeed, Bernanke & Friends are probably throwing everything they’ve got at gold right now to suppress its price. And for all we know, Uncle Sam has loaned every ingot (supposedly) in Fort Knox to carry-traders at J.P. Morgan and Goldman Sachs. The ability of these well-connected bullion bankers to borrow more or less unlimited quantities of physical gold is for them even better than a license to print money, since money itself is most surely not what it used to be. The feather » Read the full article
The futures look like they are still on track for a predicted surge to 1053.00, although the bullish argument would weaken if they haven’t accomplished this by Friday. Although the September contract failed to push past some key, late-August highs near 1038.00, most of the action took place close to those highs and well above the meatiest part of the supply zone beneath them. Night owls can try bottom-fishing at 1029.75, a midpoint pivot, using a stop-loss no wider than 1.00 point. If the trade works, consider taking partial profits or implementing a trailing stop as early as 1033.00. _______ UPDATE (1 a.m.): The pullback went no lower than 1030.75, missing our bid by a full point. Signs now point to a minimum 1040.00, or 1044.00 if any higher. Either can be shorted by scalpers using a very tight stop-loss, but you’ll be on your own thereafter.
The futures blew past a 2.9048 midpoint resistance so easily that we should infer that the 3.0695 Hidden Pivot target with which it is associated is very likely to be achieved. A pullback to the midpoint should be viewed as a buying opportunity, but I’d wait for the turn higher, assuming it comes, so that you can board on a “camouflaged” signal.
Our offbeat “strangle” in Goldman is starting to work, since the September 170 call we bought for 2.00 traded as high as 3.40 yesterday. Its purpose was to slightly leverage the upside, thereby lowering the effective cost of four Jan 130 – Oct 130 put spreads that we also hold (for 3.40 apiece). Today only, offer the call to close for 5.60. If the order fills, it will reduce our cost basis on the spreads to 2.50. _______UPDATE (10:50 a.m.): With Goldman up more than $4 so far this morning, bucking a lackluster stock market, we easily sold the call for 5.60. Do nothing further for now.
The short-term picture would turn mildly menacing if December Gold were to print down to 981.40 today. There were no promising handholds for nightowls as of 7:10 p.m., but I’d suggest looking on the 5-minute chart if you are seeking camouflage to get long with a penny-ante stop-loss.
When was the last time we saw gold take a second leg up rather than simply give up whatever gains it may have achieved overnight? It doesn’t happen too often, and that’s why beleaguered bulls may have felt something akin to exhilaration as yesterday’s $40 surge unfolded. Many of them are undoubtedly wondering whether the rally will turn out to have ended the bear market in bullion that began 27 months ago. It’s possible, of course. But technically speaking, the evidence still suggests that a Hidden Pivot target at 1125 first disseminated here a while back will eventually be achieved.
Even so, the bull deserves the benefit of the doubt for now, since both of Wednesday’s discrete thrusts did what a healthy bull is supposed to do — i.e., surpass at least two prior peaks on the hourly chart. However, the December contract will have to repeat this feat, and soon, if we are to infer that significantly higher prices lie in store. Specifically, the futures will need to pop above the 1268.00 ‘external’ peak labeled in the chart (see inset). Were that to occur today, there would be little doubt that a significant rally — i.e., one with the power to continue for perhaps at least 7 to 10 days — is under way.
Incidentally, Comex Gold has been moving very precisely in relation to our proprietary Hidden Pivot targets. Yesterday’s low at 1212.90, for one, lay just a single tick from the 1212.80 target first broached here several weeks ago when the December futures were trading around $1300. Although we had expected a tradable bounce from very near 1212.80 and had told subscribers to try bottom-fishing there, the $40 trampoline bounce in mere hours came as a pleasant surprise. _______ UPDATE (5:45 p.m.): So much for the crazy idea that bullion bulls might enjoy favorable winds for two consecutive days (see inset, a fresh chart). The futures are actually on a short-term ‘buy’ signal at the moment, but it is only for traders nimble enough to bail out if Wednesday’s rally turns out to have been a flash-in-the-pan. As implied above, buyers will need to push this vehicle to at least 1268.10 within the next day or two to avoid getting routed yet again.
At the Mining & Minerals Conference that I attended last week in San Francisco, I found Altius still to be high on the list of many savvy investors. With $130 million cash in reserve and a royalty stream that nicely offsets fixed outlays of $5 million per year, the company is well positioned to ride out whatever further pain bullion’s bear market inflicts on investors. Altius is waist-deep in iron ore investments these days, causing some to remark that bullion is no longer much of a concern to the company. This is an exaggeration, but investors should be happy in any case that the firm is doing what it takes to survive gold’s fall from $1900 to a recent $1220.
From a technical standpoint, the stock has been in a holding pattern centered on a $9-$11 range for more than three years. The weekly chart shows ‘dueling impulse legs’, implying that the tedious battle between bulls and bears could continue for yet some time, perhaps with an exhaustion skew down to $8 or a little lower. At that price, especially considering Altius’ enviable cash position, the stock would represent a back-up-the-truck buying opportunity.
We hold twelve December 145 puts, offset in ’straddle’ fashion by bullish NFLX call spreads we own. To simplify accounting, and to consolidate the risk, I’ve imputed the cost of the puts to the NFLX position so that we now hold eight December 400-410 calls spreads with an effective cost basis of 0.55. Keep in mind, however, that the DIA puts still have value. As such, I’ll recommend that you offer them to close, good-till-canceled, for 0.02 less than the market makers. To do this, wait until the options have opened each day to see what bid/asked is being reflected by DaRapacious Dirtballs. At the moment, they are showing a bid of 0.06 and and offer of 0.12 (!). This means you should be offering the puts for 0.10. Please notify me in the chat room if your order fills, since it would be nice to have the puts off the sheets even though we are carrying them for zero.
In the current forum discussion, Cam Fitzgerald focuses on coffee’s bear market to provide some lucid insights into the deflationary dynamic at work in the commodity markets. He notes that although the price of coffee beans has collapsed, falling by two-thirds since 2011, Starbucks is still charging the same four bucks for a large latte. This profit-friendly anomaly has held true for many other companies that benefit from a widening spread between commodity prices and end products. It would seem to flout the laws of supply and demand, but Cam says the textbook relationship will reassert itself with a vengeance as consumers become increasingly frugal under the weight of a deepening Great Recession.
From a technical standpoint, his theory looks quite solid. The weekly chart (see inset) implies that a pound of coffee currently trading on NYMEX for $1.03 is about to fall by half. If the futures were in fact to achieve the Hidden Pivot target of 53 cents, that would represent an 83% drop from 2011’s all-time high of $3.08. Coffee lovers may have something to look forward to, but they should be careful what they wish for, since the implication of coffee beans selling for 50 cents a pound is that the world by then will be chest-deep in a deflation of falling wages, plummeting asset values and significantly lower corporate profits.
My outlook has been bearish, with a 45.29 downside target, notwithstanding a couple of short-covering eruptions along the way. I am now lowering the target to 43.83, however, on the basis of the chart shown. Your trading bias should be bearish until the target is reached, or very nearly reached, but if and when that occurs, you should reverse the position and get long with a stop-loss as tight as 0.20 cents. I’d suggest a good-till-canceled bid of 43.88, since it’s possible the stock will turn without quite having reached our number. If the order fills and survives the stop, tune to the chat room or this page for further guidance. _______ UPDATE (November 13, 8:33 p.m. EST): The stock has lost my interest and attention, so I’m taking it off the front page for a while. One final note, however, that could prove useful to camouflage traders: At Wednesday’s closing bell, it reversed the bearish polarity of the last three weeks with the bullish impulse leg shown (see inset, a fresh chart). ________ UPDATE (November 26): After taking its sweet old time reaching my 43.83 target, Facebook has taken a lunatic bounce this morning from within 23 cents of it, hitting a so far high of 46.08. If you loaded up near the low, please let me know in the chat room and I’ll provide tracking guidance. Whatever you may have bought, half should have been exited by now for a partial gain.
My minimum downside expectation is still 76.05, a Hidden Pivot that you can interpolate for trading purposes in whatever way you choose. If the support is breached, look for the weakness to continue down to at least 75.57.