Monday, February 22, 2010

As the hourly chart (see inset) shows, an upthrust exceeding 424.17 today would be just the thing to re-energize the so-far corrective rally from 363. HUI is already on track to hit 434.25, provided it doesn't dip below 406.75 first and it can get past 420.50, the target's midpoint sibling.  Please note as well that last week's top occurred almost precisely at the halfway point of the decline  from January 11's high.  This suggests that we should look for resistance at 432.51, the 0.618 line, in addition to the expected pullback from 434.25.

For lack of ugly news, bears were getting no respite Sunday night.  A short-squeeze on the opening seemed almost too pat to be credible, but even so, I am not encouraging anyone to get in its way.  Actually, if the Industrial Average trashes a midpoint resistance ay 10429 -- the high on Friday was  10421 -- it would be unstoppable below 10478. That number is a short, but tie it to a tight stop.

We hold seven April 42 puts for an average 1.05, and a March 44 put for 0.23. If the QQQs are selling for 45.19 or higher ten minutes before the close, exit the position at-the-market.

After having missed an 81.56 rally target by just 0.22 points, the Dollar Index has plunged by nearly a full point. The pullback would become bearishly impulsive on the hourly chart if it hits 80.18 today, but there's no point drawing any conclusions until that happens.  The decline has already exceeded 50% of the rally from last Wednesday's low, but support at 80.24, where 0.618 Fibo line comes into play, remains to be tested.

A Hidden Pivot resistance at 16.795 is equivalent to the 1148.70 target given today for April Gold. Its midpoint sibling lies at 16.235, and so a pullback to that number, if it comes,  could be the best buying opportunity ahead of the push. Keep in  mind that the rally would need to go somewhat higher, surpassing a key peak at 16.950 recorded on February 3, to refresh the bull trend on the hourly chart.

Gold looks primed for a thrust to 1148.70, a Hidden Pivot resistance whose midpoint sibling lies at 1123.40 (30m chart, where A=1078.10 on February 12).  Night owls can try bottom-fishing near that hidden support, but because the uptrend is so well-developed, it may require the subtlety of the 1- or 3-minute chart to find a camouflaged entry spot not over-subscribed by eager bulls.

In trading Sunday night, the futures were frolicking above the midpoint resistance shown in the chart, but they'll need to close above it on Friday to significantly shorten the odds of an easy finishing stroke to 1167.75.  More immediately, a push above a minor Hidden Pivot midpoint at 1111.25 -- a tick above Friday's high -- would open a path to at least 1117.25. DaBoyz are unlikely to stick their necks out overnight unless there is news enough to slap shorts around with impunity, but if they can keep the chop shallow in the meantime -- above 1103.00, say -- goosing the futures to 1117.25 at the bell should be a piece of cake.

The price of gold has corrected 15% since Comex futures hit an all-time high of $1229 per ounce in early December. How much more weakness will it take for gold to finish basing for the next big move -- a rally that we expect to carry into the mid-$1400s?  A definitive answer could come this week, since the U.S. dollar, which has been in a bear rally since Thanksgiving, is close to some key Hidden Pivot resistance points. If the dollar were to blow past them it would be akin to the groundhog seeing his shadow – i.e., yet more weeks of winter for gold investors. However, there is evidence to suggest that it might be winter of the mildest sort, since gold has begun to show resilience whenever the dollar rallies. The graph above shows this.  Note that the price of gold declined more or less proportionally when the dollar started to rally in early December. Their inverse movement stayed pretty close until recently, with the Dollar Index rising 9.5% off its lows as gold futures fell by 8.7%. But starting about two weeks ago, gold began to rise even when the dollar was firm. To be sure, the dollar’s steep upward trajectory has flattened some since early February. But it has risen about 0.25% nonetheless, presumably consolidating for another thrust.  Despite this, gold has managed to eke out a 6.5% gain over the same time – a performance that should hearten investors who have patiently awaited an end to a correction that is now in its third month. $1085 ‘Worst Case’ For the time being, though, the dollar appears bound higher. Hidden Pivot analysis suggests that the immediate upside potential of the Dollar Index is about 3.3%.  A corresponding decline in gold would bring the April Comex contract