Thursday, January 14, 2010

Price action has been so lame since Thanksgiving that you could almost get to feeling sorry for the little sumbitch (if not necessarily for Goldman's officers). The long-term chart is hard to get excited about, especially if you are short the stock or perhaps intending to get short. As much could be said for the bullish case, so we'll leave the stock alone for a while.  A steep surge hitting 185 would change the picture significantly, however, and so I've set an alert there.

The Dollar Index has traced out some fiendish patterns recently, but I like the one shown, which promises to deliver 76.08 to the downside. Notice in the chart how all three coordinates -- A, B and C -- are delicately carved from single bars.  The midpoint support has already gotten pasted, hinting of more weakness to come.

It took two months for a well advertised Hidden Pivot target at 1149.50  to be reached,  and so we ought to be impressed by the fact that the futures appear to be getting second wind just three days later. If and when they break out above 1149.50,  a Hidden Pivot at 1166.00 will make a logical target. It would be subject to confirmation by a possible stall at its sibling midpoint, 1147.00.

Silver is tracing out a rally pattern somewhat different from gold's. The immediate target is 19.030, and if it's hit, that would remedy nagging doubts that surfaced when the stock surged on Monday without knocking off the external peak at 18.990 recorded on December 4 (see inset).  If a rally today exceeds the target by more than three tickets, we could confidently infer that the key high at 19.500 from December 2 will not long endure.

Today's gold tout introduces a long-term Hidden Pivot target at 1274.70, and two others below it, so check it out.  I've also filled in the blanks on a gold chart to show how the 1138.70 bull "trigger" that I'd flagged could have been used to get long without much risk or difficulty.

When I projected a low in February Gold at 1107.70 yesterday morning in the chat room, I was pretty confident the Hidden Pivot support would be reached, since its midpoint sibling at 1122.50 had been exceeded by a very decisive $4, and because the pattern itself was close to perfect.  Instead, and much to my surprise, the futures turned on a dime at 1118.50, seemingly in the middle of nowhere, gaining $27 by the bell.   After-hours trading pushed the rally the few ticks higher needed to trigger the breakout above 1138.60 that I'd been looking for.  If you were looking for camouflage to get aboard at that point, although it came with great subtlety, as long as you applied the simple rules, it wasn't hard to find or to use (see inset). Looking ahead to Thursday, we should take encouragement if yesterday's precipitous reversal racks up a couple more "external" peaks to solidify the uptrend. That would imply a print at 1158.40 at a minimum, and it would put a midpoint resistance at 1175.00 in play thereafter as our minimum upside objective. That number is part of a pattern begun from 1028.00 just before Halloween, and if it completes to the target, that would imply 1274.70.

The big boys have been trading body blows in gold, producing a lot of violence but no clear winner, at least not yet.  We expect the buyers to prevail eventually, and we’d suggest that you take the odds if you find someone with enough misplaced confidence to bet the “Don’t” line.  Still, we’d be the first to concede that sellers can pound bullion quotes mercilessly on a given day if the news is right. Remember in early December when they socked Comex futures for a $60 loss on “news” that the Government’s made-up unemployment number had dropped by two-tenths of a percentage point, to 10 percent?  That was on a Friday, when fear and greed are typically running higher than on other weekdays. The damage was serious enough that bullion futures limped $50 lower before finding a bottom just before Christmas. Yesterday, it looked like bears had the good guys on the ropes once again. Comex Gold was trading around $1118, down $40 from the previous day’s high, and looking even lower, to at least 1107.00. That last number is a Hidden Pivot target, and it was as clear and compelling as could be. Lo, buyers flooded into the market for no apparent reason and turned the tide, racking up a $27 gain into the close.  We were mystified by this until we heard from our friend and longtime subscriber Jonathan Auerbach of Auerbach Grayson.  Here’s his account, right from ringside: Forget the Pundits “For background, I have a COMEX seat and regularly trade gold. So this morning I want to share with you my morning gold notes over what I believe was a prodigious confrontation yesterday in the pits. Don’t waste your time this morning reading the pundits on where gold is going.  Yesterday was an epic battle in