Monday, November 23, 2009

(I have re-posted this link because the initial response was so heavy.) I have always expected the dollar's collapse to happen in mere hours, not weeks or months.  A blogger named John Galt has imagined how things will play out that day, and his scenario seems to me not merely plausible, but precisely inevitable.  It would have bullish implications for commodity-based economies such as New Zealand's, and this would seem to afford investors a relatively safe haven besides gold when the collapse comes to pass. Click here  for Galt's scary account of a stormy day that seems all but certain to arrive.

In the Rick’s Picks chat room, where the focus is sometimes obsessively on gold, the meaning of “long-term” can range anywhere from 90 minutes to about three hours. Small wonder, then, that whenever Comex precious-metal futures hit an air pocket and briefly plunge, the shock waves wash over the room like a tsunami.  In fact, these fleeting episodes mean nothing, considering that the larger, bullish environment for gold contains more testosterone than a Chicago stockyard. Who needs to worry about what those nasty, retrograde bullion bankers, commercial traders and by-now impotent central banks are doing when you know for certain that the likes of China and India are size buyers? And they are, along with Russia, Indonesia, Arabia and every other sovereign entity that is not afraid to offend the U.S. with a defensive leap out of dollars. Under the circumstances, now that its fan club has grown to encompass the entire non-English-speaking world, gold can barely sell off any more. China is naturally gold’s biggest supporter, since the country supposedly holds three quarters of its $2 trillion cash hoard in dollar-denominated instruments, chief among them a mountain of Treasury paper. Since we know the Chinese didn’t get that rich by being stupid, we can be fairly certain they are not content to merely “hope” that the U.S. economy turns around, taking the dollar along with it.  This scenario is as implausible as a credit-financed auto-and-housing boom in the U.S., and they know it. And so we shouldn’t be surprised to find them quietly buying bullion whenever a large quantity is offered for sale.  Subversive Ideas  This type of buying does not typically drive gold quotes into a bullish frenzy; rather, it supports the market whenever prices turn soft. (There will always be big sellers around to make this happen --

Far from leading the market higher in its hour of need, Goldman has turned into the proverbial cement shoes, sinking whatever prospects remained for a year-end short-squeeze of the broad averages.  The stock has had noticeable difficulty reaching even the Hidden Pivot midpoints of retracement rallies, and so we should now expect to see it achieve downside targets with consistency. The nearest lies at 168.33, and it can serve as a minimum downside objective for the near term. The 161.84 target of a larger pattern remains viable as well.

A key target at 1174.90 remains viable, but we'll focus on a more conservative objective for now at 1155.60. That's a Hidden Pivot, and it comes from the pattern shown in the accompanying chart.  An easy move past it would activate another at 1158.20. These two numbers can be used by scalpers, but from an analytical standpoint any lack of resistance will confirm a swift finishing stroke to 1174.90.

The futures ended the day on a mild upswing, but that does not negate the fact that earlier weakness had penetrated a midpoint support at 1087.25.  This implied further downside to 1079.50, exactly four points beneath Friday's intraday low.  The mood could change over the weekend, of course, but we should use 1079.50 as a minimum downside objective as long as the relevant point 'C' at 1095.25 is not exceeded to the upside first.  If it is, without the 1079.50 target being reached, that would have bullish implications for the near term. _______ UPDATE (12:20 a.m.): Shortly after midnight, the futures were playing chicken with the 1095.25 point 'C' noted above, but without having exceeded it.  If DaBoyz were really interested in buying stocks, they'd have found a way to manipulate the index futures lower by a few points tonight, not higher. Be that as it may, the buzzards will probably be able to trigger a mini-short squeeze if they can push ES above 1095.25.

From a Hidden Pivot perspective, Silver's vital signs remain weaker than Gold's. Even so, bottom-fishing at 18.275 can be tried if 18.540 (aka point 'C') has not been exceeded to the upside first.  That's a Hidden Pivot midpoint, and if it's breached it would open a path down to as low as 18.015.