April 2010

On Tuesday the Ten-Year Notes made a high for 2010 and are projecting up to a tradeable "D" target of 118^17.  After making a low in early April, the notes have worked their way back up and then some, making new highs for the year.  Some observers are making adjustments to their forecasts, to the effect that rates at the long end of the Treasury curve need to probe for a near-term low.  This means higher prices for the securities, and we favor the "D" target of the newly confirmed pattern shown on the chart over its sibling midpoint of 117^23.  Traders should risk no more than $100 per contract on either pivot.  There is a similar pattern in the Bonds which pivoteers can analyze, though we think the Ten-Year pattern looks better. (Posted by Doug McLagan)  _______ UPDATE (May 4, 10:58 p.m. EDT):  The futures have been hovering not far below our "D" target of 118^17 for a number of hours now.  Due to the relatively small size of the pattern, we reiterate that no more than $100 per contract should be at stake in a shorting attempt. _______ FURTHER UPDATE (May 5, 10:06 a.m. EDT):  After a fleeting pullback from 118^16 to 118^13, the futures powered quickly higher through our target.  The rally on the long end of the Treasury curve is spectacular, on an eventful trading day.

The pattern show in the chart is arguably the most logical choice for projecting the next rally top, but it could also yield a nice entry point for a ride north.  As of 1:30 a.m., the retracement from B was a tick shy of falling into the bottoming window.  However, if and when it does, printing   1201.25 or lower, the futures should be considered fully recharged for the next leg up.  Entry at point 'X' would be triggered exactly 5.50 points above the low.  There are elements of camouflage here because the rally top at 'B' looks like little more than a failed attempt to conquer the final, fleeting spike before Tuesday's collapse. In fact, the A-B rally is a legitimate impulse leg because it surpassed the required two prior peaks. _______ UPDATE:  A market spooked by Goldman's new troubles has taken the futures down some, relocating our 'A' to 1177.75.  Bull trades are ill-advised at this point, although, as of 11:30 a.m., buyers could speculate with an 1196.50 bid, stopp 1195.75. Three ticks' risk is all this one's worth.  _______ FURTHER UPDATE :  The support held up for all of two minutes, and we got stopped out for a $38 trading loss. Next stop:  1190.50.

I've taken pains to show how a "camouflage" trade could conceivably develop in May Silver. The actual price action could differ significantly from the hypothetical, however, and so I would encourage the discussion in the chat room of possible adaptations that can be tried if things don't play out perfectly.

A minor Hidden Pivot resistance at 1192.60 can serve as our minimum upside objective for the moment, but any higher would imply a finishing stroke to at least 1208.90. We hit the jackpot yesterday with a trading recommendation that went out late at night and which was based on a minor retracement in the after-hours.  Just 50 cents of initial risk could have gotten one aboard for a $10 ride.  June Gold is showing no such softness this evening, however, so night owls may have to buy a minor rally pattern rather than waiting, as we did last night, for a pullback to reach its 'd' target.

It's not often that perfect camouflage develops on charts of greater magnitude than intradays, but there's a real doozie taking shape in May Silver.  Notice how yesterday's thrust created a high that did not exceed the 18.605 resistance peak from April 12.  While most traders and chartists will see in this Silver's failure to break out, we see a promising impulse leg that surpassed the required two prior peaks. This does not constitute camouflage yet -- we'll need to see a pullback first to at least 18.195 -- but if things develop along the lines of what I've drawn in the chart, it could set up a potentially very-low-risk buying opportunity for us. And even if price action does not conform to our ideal, we can still use other tactics to catch a ride following an uncorrected breakout above the April 12 peak.

Hi-ho, Silver, awaaaay!  We told subscribers to look for a 25-cent rally in the May Comex contract, but by day’s end it had surpassed our wildest expectations, closing with a 43-cent gain on the day.  Here’s the forecast as it went out to subscribers the night before: “The futures looked poised for a 25-cent pop, based on a Hidden Pivot target at 18.370.  First, however, they’ll need to get past…[a Hidden Pivot resistance] at 18.210 that lies just beneath yesterday’s spike top. My gut feeling is that once the [resistance] is out of the way, the move through the spike top, which lies at 18.235, will be a piece of cake.” If you want to see what a piece of cake looks like, check out the chart above. After blowing past Wednesday’s high as the morning began, the May futures needed barely and hour’s rest to take out an equally daunting peak recorded on Tuesday. And as if that weren’t impressive enough, the May contract was holding onto most of the gains in after-hours trading.  Note in the chart that as of around 6:30 p.m. EDT, the correction of Thursday’s surge had yet to come down, even, to the level of this week’s previous high. What to Look For All of this bodes well for Silver’s performance in the weeks ahead, and if the rally goes just a little further today, exceeding the 18.900 high recorded in early January, we’d infer that buyer will have little trouble punching through the 2008 high at 19.823. Moreover, and to be precise, a breakout above last year’s high would all but clinch a move to at least 20.21, or to 21.53 if any higher. For our part, we’ll be looking for ways to get aboard with as little risk as possible as Silver

Gold has given up considerable ground since topping yesterday at 1175.30, suggesting that buyers are in no rush to consolidate the rally. Night owls should consider buying the  June contract down around 1162.70, although it's possible we'll see a turn from 0.70 above that number. _______ UPDATE (11:15 a.m. EDT):  1162.70 worked beautifully as a place to go bottom-fishing, since it caught the low of a $10 bounce within 50 cents.

Yesterday's high at 82.71 came within a nickel of a well-defined Hidden Pivot, so that could be it for a while.  If not and the Dollar Index moves higher over the next day or two, we should infer that the 83.59 target of the larger pattern shown in the chart is in play.

Although the 151.00 Hidden Pivot seems to have arrested Goldman's so-far 35-point plunge, the stock is not yet out of the woods. The minor uptrend projects to 159.76, or perhaps 160.85 if any higher, but we should like to see a print exceeding 169.00 before we assume that the worst is behind.