Tuesday, September 15, 2009

The Dollar Index's fall to a ______ target has been so long in coming that we should be on the alert for a reversal before it is reached. On the hourly chart, this would be signaled by a ______ print, but if ______ is touched, bears had better dive for cover.

The _____ target given here earlier will make for a juicy shorting opportunity if and when Goldman gets there, but I'm reluctant to play the upside unless we can get in at a retracement target. The best such opportunity tied to a Hidden Pivot would be down near _____, the midpoint sibling of _____.

December Silver bettered our bullish benchmark at 16.730 by a single tick yesterday, hinting of more upside to come. If so, the futures 16.850 will need to touch 16.850 today to demonstrate  their eagerness to challenge last Friday's 17.015 peak. Once above it, the futures would be an odds-on bet to reach a minimum 17.275 over the very near-term.

There's no guarantee that December Gold will follow the script I've provided in today's tout, but if it does, please consider the do-it-yourself entry strategy sketched out in the accompanying chart. Like most "camouflage trades, this one seeks to catch a short ride that could turn into something bigger. In this case, potential is to as high as 1024.90.

It's not often that we find potentially great camouflage on the hourly chart, but if December Gold moves as I have hypothesized in the accompanying chart, it will set up a beautiful entry opportunity at 'X' that seems very likely to give buyers a pleasurable ride.  I am not going to complicate my instructions by telling you how to get long in a hundred words or less, but will instead leave it up to pivoteers in the chat room to do the explaining if and when opportunity knocks Tuesday morning. _______ UPDATE (10:05 a.m.): Gold eased lower overnight, and so the entry opportunity we were looking for did not materialize.  The weakness hints of more downside to ____, or to _____ if any lower. Alternatively, an upthrust that touches _____ would put bulls back in the driver's seat.

That ______ target may be so stale by now that it can be shorted without fear of bumping heads with the riff-raff.  I won't get in your way by suggesting the usual niggling stop-loss, but let me reiterate that the target itself is as clear and compelling as can be -- a bet-the-ranch number if it had been hit last week on the the first try. If you're superstitious and would rather play the December contract, the equivalent target, a Hidden Pivot, lies at _____.

Gold hasn’t made much headway since the beginning of the month, when COMEX futures surged $50 in the space of two days. With the dollar suffering from the vapors, there’s no compelling reason why the December contract should have loitered near $1000 ever since.  Granted, that’s a nice, round number, and it probably works smoothly with put-and-call hedges that allow bullion dealers to borrow as much of the stuff as they’d care to without risk. It is the same thing we see on expiration Fridays in the equity options market. When a stock gets “pegged” to a strike price, it’s possible for even small players to transactquantities of stock with notional values in the millions or even tens of millions of dollars. Their tactics go by such names as conversions, reversals, jelly rolls and buy/writes, and they usually yield relatively small profits over short periods of time, albeit with nearly zero risk. That’s about the only reason we can think of for gold to have turned flaccid at $1000:  It is a price that is beautifully suited to arbitrage.  Although this may have caused gold futures to flatline on the intraday charts (see above),  it has set traders’ otherwise stony hearts palpitating with anxiety:  over Barrick’s decision to cover its short hedges; over the G-20 meeting in Pittsburgh at the end of this month; and over the latest Commitment of Traders report, which showed the smart money to be betting the “Don’t” line heavily. In fact, relative to open interest in gold contracts, Big Four traders are long 18.5% versus short 28.9%. The figures are even more bearish in Silver, where the big commercials are short more than four contracts for every one they are long.  Are these guys ever wrong? someone asked in the Rick’s Picks chat room yesterday.