April 2010

Yesterday the Yen confirmed a bearish pattern on the daily chart which projects down as far as 1.0340, its "D" target.  This is slightly below the "D" target of a larger pattern which is perhaps more analytical than actionable, shown in grey on the attached graphic.  If the Yen is itching to turn back up, it might do so at the midpoint pivot of the new pattern (shown in red on the chart), which comes in at 1.0632.  But we will recommend trading the "D" target with a buy at 1.0342 and a stop at 1.0334, for a hypothetical risk of $100 per contract.  (Posted by Doug McLagan)

A midpoint support at 1131.10 is valueless for purposes of bottom-fishing because it coincides with a key low recorded on Monday; however, it can serve as a minimum downside target if sellers dominate today.  If it is buyers who are in charge, the key resistance is a Hidden Pivot midpoint at 1145.70.  Its breach would telegraph a move through yesterday's high, 1146.80, followed by a finishing stroke to 1153.50. ______ UPDATE (2:00 p.m. EDT):  The futures are on track to hit 1153.50, but they took a roundabout route. After marginally exceeding the 1145.70 resistance in the wee hours Wednesday, it took buyers 13 hours to get second wind.  They've since pushed the June contract as high as 1151.20 today. 

A detailed explanation of yesterday's gold trade is available in recorded form by selecting the June Gold tout for Tuesday in the pulldown archive.

A three-day rally has transformed the hourly from amorphous and more or less useless into a veritable cornucopia of price information.  The data suggest the futures are bound for a very shortable 1219.25 (A=1171.00) now that they have made suet out of midpoint resistance at 1199.50.  Night owls please note that a 1207.75 print trips an entry signal for a potential ride to 1209.50 (a midpoint) or perhaps even to 'D' at 1213.00.  _______ UPDATE (2:09 p.m. EDT):  The weak midpoint resistance at 1209.50 has precisely contained the rally so far, demonstrating yet again that this endless bear rally is generating almost zero buying interest.  The modest rally target at 1219.25 should be regarded as an almost done deal, but it could take three weeks for impotent buyers to get there. 

Yesterday's selloff during regular hours has not negated the bullish fact that Silver pushed above our benchmark at 18.005, refreshing the uptrend on the lesser charts in the process. But the burden of proof will remain with bulls over the near term nonetheless, since a healthy uptrend must demonstrate its ability each day to pierce prior resistance.  The nearest such resistance on the 5-minute charts lies at  18.100, so that's where we'll set the bar for now. If sellers prevail, however, you can try bottom-fishing at 17.620, a Hidden Pivot midpoint, with a stop-loss as tight as 2-4 ticks.

It is entirely conceivable that the SEC's lawsuit will be the beginning of the end for Goldman Sachs & Co., since class-action suits likely to follow are potentially endless.  Meanwhile, I am holding to my "hula prediction" that the stock eventually will trade under $30, but I must mention that, at the moment, GS does not look like a disaster from a Hidden Pivot perspective.  See for yourself, since, as the daily chart makes clear, the stock's steep dive this week failed to create a bullish impulse leg.  This fact amazed me when I first confronted it, but I cannot simply ignore the evidence just because I believe deep down that the company is a dead duck.  There is no impulse leg here (i.e., on the daily chart) because the stock had two good runs at the #2 external low but couldn't crack it.  The retracement rally has since gone far enough to produce a legitimate B-C leg (relative to one-off A=182.01, 15m),  and we'll be watching closely to see whether the next bout of weakness cracks the midpoint support of the  ABC pattern thereof.

Now we learn that the SEC split 3-2 over whether to go after Goldman Sachs in court. Supposedly, the regulatory agency prefers unanimous votes when bringing enforcement actions against the firms it regulates. Why the exception this time?  The Wall Street Journal made it sound like it was simply partisan politics that carried the day – i.e., the SEC’s two Republicans voted against suing Goldman for civil fraud, but the three Democrats prevailed. That is superficially what happened, and it is as much of the story as the SEC is willing to divulge right now. But it’s bound to leave many observers, particularly Obama-ites in Congress who are out to pillory the bankers, with the impression that the two Republicans were merely looking out for their fat-cat buddies on Wall Street. This thought occurred to us as well, so we’d have to concede it is at least possible. But might there have been another reason why the Republicans backed away from bringing formal charges against Goldman?  We think there is and that it goes to the heart of the corruption in which the world’s largest banks have inextricably trapped themselves. For if you assert in a of court law that Goldman defrauded its customers, you have implicated every bank in the big leagues. Enabled by their respective central banks to create loans from thin air, every one of them – even banks run by otherwise spotless Swiss Burghers -- have played the same Ponzi game as Goldman.  Now, regardless of whether the charges brought against Goldman are civil or criminal, they will open the door to an endless flood of litigation with the potential to bring down the entire banking system.  From this point forward, Goldman will be fair game for every aggrieved city, county, state, sovereign fund and class

The Loonie has rallied off of Monday's low and has confirmed a new bullish pattern on the daily chart.  We now have several active bullish patterns on the daily and weekly charts, and although the decline of the last two sessions was impulsive on intraday timeframes, it stopped one pip above an important prior low at 0.9788.  Viewing the failure to get past that low and the subsequent rally to confirm the new daily pattern as bullish, we should watch for a camouflaged opportunity to get long.  This appears most likely in the event of a rally to slightly above the prior intraday high of 0.9882 followed by a pullback, a situation which closely resembles the one described in today's gold tout.  Our minimum upside objective is 0.9960, the midpoint of the new daily pattern.  (Posted by Doug McLagan) _______ UPDATE (7:20 p.m. EST): Anyone who got long before 9:00 a.m. EST went for a profitable ride up, courtesy of a Canadian central bank announcement suggesting higher interest rates to come.  The downward impulse of Friday was wiped out, and our upside objective of 0.9960 was surpassed easily.  The associated "D" target of 1.0131 looks like a chip shot from here.

If June Gold moves in the way I've shown in the chart that accompanyies today's tout, it could provide a low-risk entry opportunity for night owls (or perhaps early birds).  This is a bull play, but a few things would need to happen before it becomes viable.