December 2009

With gold in the throes of a major correction, we took a long, hard look not only at the Comex futures contract, but at the Dollar Index, where a short squeeze about to enter its second month has progressed, much to the detriment of bullion. Still-lower prices for gold seem likely, as do higher prices for the dollar. What would change this scenario? A good, strong impulse leg on the hourly chart. Until it happens, however, we should infer that the downtrend is likely to continue. This same idea was relevant in our analysis of T-Bond futures, which are in a protracted decline.

The weekly tutorial session will be held Wednesday morning as usual, but updates for Thursday will be limited to just a couple of widely followed vehicles, and there will be no new commentary.  To those of you who won't be around, let me wish you a happy New Year, good health and joyous tidings in 2010.

Bulls dominated yesterday, although it's curious that they couldn't muster just a little more thrust to take out the 77.99 external peak I'd flagged as a bullish trigger point. This feat seems likely to be achieved today, which would square with my current, dour forecast for gold.  The nearest important Hidden Pivot resistance above lies at 78.25, and it can serve as our minimum upside target for the near term.  If DXY exceeds this number on a closing basis, though, it would be hinting of more upside to at least 79.18.

We bought two January 230 calls yesterday for 1.00 and have bids in for four more: two @ 0.52, and two @ 0.42, both good through Thursday.  This is a speculative bet on the prospect of a Big Rally kicking off the New Year.  This seems plausible if not likely, but if it does occur, you can bet that AAPL shares will lead the charge.  I expect the stock to regain traction, though not to explode higher, by week's end.

Shortly after 8 p.m., the futures were struggling to find traction at 1091.30, the very tradable Hidden Pivot support shown in the chart. They'd need to rebound to at least 1110.60 on Wednesday to turn the momentum in bulls'  favor;  otherwise a 1046.80 target will be in play, along with another at 1028 that comes from a larger pattern identified here earlier.

Judging from Monday's turgid action, this is not likely to be an exciting week on Wall Street. Expect the broad averages to continue their relentless drift higher -- presumably at least to the targets I've proffered for the E-Mini S&P and the Dow Industrials.

The futures have pulped the 116^20 downside target given here a couple of weeks ago and now appear bound for at least 113^13.  The bonds could catch a bounce on the way down from 114^17, the Hidden Pivot midpoint of a long-term pattern, but if it gives way easily, that would shorten the odds that the lower target will be reached sooner rather than later.

Six weeks of gratuitous chop has taken the fun out forecasting this vehicle, but I'll mention a 10,728  minimum target nonetheless, in case you were wondering.  That's a Hidden Pivot resistance, and it's been the rally bet since November 16, when a  breakaway thrust tripped an alarm at exactly 10,310

The correction from last Tuesday's peak should turn from 77.44  or higher if bulls are to resume their dominance. That would become instantly true if DXY were to pop above 77.99 today.  Traders looking for a place to bottom-fish can use a 77.02 target -- my worst-case low for the near term, but also the spot with the best odds for speculative buying. _______ UPDATE:  DXY has surged today, but the rally peak has thus far failed to take out the look-to-the-left peak at 77.99 mentioned above.  Bulls are obviously in charge, if noticeably lacking in guts.