Tuesday, February 9, 2010

Since topping Friday just a hair below an important Hidden Pivot target at 80.78, the Dollar Index has created a single bearish impulse leg on the intraday charts. It has yet to play out, but the implied target is 80.03. An easy breach of the support would imply still lower prices, but it would only take slippage to 79.96 to refresh the downtrend on the 15-minute chart.

Silver's intraday charts are exhibiting the same faint-heartedness as gold's, retreating into a dither  after the failure of Monday's rally to top any distinctive peaks in the lesser time frames.  It also turned a minor Hidden Pivot support at 15.020 into suet, suggesting the selling is not done. That would imply more slippage to 14.435 over the near-term, or perhaps to 14.085 if it gives way. Both targets come from obvious patterns on the 180-minute chart. Alternatively, a show of strength today could hit 15.535.

As we found in the E-Mini S&P, all signs point lower.  The 1037.90 target I'd employ for bottom-fishing seems out of range for today, but we should use it nonetheless as a minimum downside objective for the next 2-3 days.  It's not a healthy sign that my second choice, 1052.80, got pasted on Friday.  Enjoy a rally if it comes, but get your guard up if it approaches 1081.90.  That's a Hidden Pivot support turned into resistance by last week's minicrash, and it would be a great place for DaBoyz to spring a bull trap. Pivoteers can find it on the 180-minute chart, where A=1163.40 on January 11. _______  UPDATE (8:59 a.m. EST):  Who are we to complain if index futures are leading Gold around by the nose?  The April contract now looks bound for at least 1091.60 (subject to the caveat mentioned above), a midpoint resistance at 1076.70 having become nominal support.

The futures came within a hair of a resistance peak recorded last Thursday before chickening out yesterday (see chart). This was a less-than-subtle foreshadowing of the 15-point selloff that followed. If it were a gold chart, I'd suggest watching the 5-minute bars for the very first sign of a bullish turn. But this is a stock index, and I feel no compulsion to give it the benefit of the doubt, at least not now. Buyers are showing no enthusiasm whatsoever, and shorts seem more difficult than usual to spook. My minimum downside objective for the moment is 1039.75, a Hidden Pivot support that is better used as a bearish objective than as a place to bottom-fish.  It can be fished  nonetheless, stop 1038.75. ________ UPDATE (8:51 a.m. EST):  Apparently unembarrassed by the yellow stripe we'd painted on their back, DaBoyz have squeezed the futures sufficiently, probably, to give shorts palpitations on the opening. I'd like to see a print at 1092.00 today, however, before we lend our begrudging respect to their characteristically unseemly, and presumably doomed, enterprise.  That  would turn the hourly chart moderately bullish, though no moreso. (Moreso would require at least 1103.75.)

The door will be open all morning for those who want to drop by and talk about the Hidden Pivot method.  I will open a virtual webinar room about 15 minutes before the NYSE opening bell and remain there until noon EST.  Instructions for joining the session will be posted in the chat room by 9:15 a.m. We'll be looking at real-time action and for opportunities to trade, but the main purpose of this get-together is to provide an informal forum where you can simply ask away.  A headset and mic will be useful but not essential, since you'll be able to text questions.  All are invited, including friends of subscribers.

With the correction in gold prices now entering its third month, bulls would do well to take the long view.  Compared to the gut-wrenching grind to hell in 2008, the current consolidation has been a piece of cake. Since hitting a record high of $1229 in early December, the price of an ounce of gold has fallen $185, representing a decline of 15%. In comparison, the 2008 correction amounted to a full-blown collapse. Prices fell 35% over a seven-month period, from $1066 to $694. The chart below shows both corrections. We’ve also drawn in some hypothetical price bars in red to show what the chart would look like if this consolidation were to track the path of the earlier one. That would yield a bottom near $856 in early June. If that sounds like strong medicine, consider the payoff:  The price of gold rose 77% from its October 2008 low. If a similar situation were to play out in 2009, gold would hit 1515 by the summer of 2011. That scenario sounds like a scenario that everyone but bullion bankers and Democrats could root for. More immediately, the Rick’s Picks forecasts calls for further slippage down to at least 1014.20, basis the April Comex contract. That’s less than 5 percent below current levels, so it could conceivably happen by the end of this week or early next. We’d buy aggressively down there with a tight stop if the opportunity were to present itself.  Since we never want to chisel these predictions in stone, we should also allow for the possibility of a bullish reversal at any time. To achieve that today, the futures would need to hit 1077.40.  A bullish turn from above 1014.20 – from here, perhaps – is not exactly a longshot bet, either, since our analysis for