Thursday, May 6, 2010

In today's touts, I've noted a potentially important turning point in the Dollar Index.  It was hit yesterday, and if the Hidden Pivot resistance holds, it could lend buoyancy to bullion in the days ahead.  Thrill-seekers may want to home in on the possible bottom-fishing opportunity (and teaching experiment) I've flagged in Google.

With yesterday's 500.47 low, Google is closing on a 488.33 target, a Hidden Pivot that would max out the theoretical downside on the daily chart.  I don't trust this stock to give us a precise low for bottom-fishing with a tight stop-loss, but my expectations are high for a tradable turn from somewhere very close to our number. If you're hunting for camouflage, I'd jump onto the 3-minute bars if and when Google comes down to 490.50.  I've set a screen alert so that if the opportunity presents itself, we can try to catch this one together during a real-time webinar.  I haven't played around with Google this way before, but I suspect the stock can be easily cornered and trapped if we chase it down on the very lesser charts as it approaches a crucial turning point. ______ UPDATE:  With the Dow in a thousand-point freefall, Google bottomed at $460, down $50. However, the subsequent surreal, $50 bounce occurred too quickly to act upon, much less discuss in a webinar.

Yesterday's high came within 0.06 points of a compelling Hidden Pivot at 84.25 (see chart), so we might look for a top here of at least intermediate importance.  If the Dollar Index simply continues higher, however, the next place where we might look for a tradable top would be at 85.67, a Hidden Pivot found by relocating point B up to 82.24.

The bounce from yesterday's lows looked bound for 1188.70 at the close, subject to midpoint resistance at 1179.50.  A print at that last price would not encounter any obvious structural resistance, so it's possible we would have relatively little competition if we were  to attempt to get long on a breakout above our "invisible resistance." As of around 9 p.m. EDT, there were no downtrends on the lesser charts to set up a possible bottom-fishing attempt. _______ UPDATE (9:03 a.m. EDT):   The strategy was a winner, since the futures surged $6 after stalling at precisely 1179.40 for two two hours in the wee hours.  They have since sold off as they so very often do after making an overnight high, but the 1188.70 target will remain valid in theory as long as 1170.30 has not been breached to the downside. _____ FURTHER UPDATE (11:27 a.m. EDT):  The futures rallied to exactly 1188.60, then pulled back to a so-far low of 1182.00.  They appear to be consolidating for another run-up, but it seemed to be developing too slowly to hit its 1202.40 target during this session.    Keep in mind that we have a more important target working as well -- at 1208.90.

Yesterday's price action was so sloppy that it may need a good, clean head-fake today to complete what looks like a nasty distribution.  I'll suggest shorting into the rally, but it remains to be seen whether this can be done at the c-d midpoint of a minor uptrend. My preference would be to look for camouflage on a downtrending abc, since shorts are likely to be more nervous than usual with volatility running so high this week. If the Indoos simply head lower, use a midpoint pivot at 10768 for potentially tradable support. ______ UPDATE (11:21 a.m. EDT):  By cracking the midpoint support by a decisive 15 points (so far), the Dow has generated a new minimum downside target at 10589.  Sayonara, all you bulls!

Silver quotes have come back down to earth with a thud, so perhaps it’s time to review our outlook, which was, and still is, quite bullish for both the intermediate and long-term. The Comex July contract has shed a hefty 10 percent of its value since Tuesday, settling at 17.51 yesterday after peaking just two days earlier at 18.89. Although this has caused some gnashing of teeth and sporadic expressions of anguish in the Rick’s Picks chat room, long-term bullion players who frequent the room seem to be taking the move in stride. We ourselves sounded an especially bullish note a week ago when we wrote that it would be a “piece of cake” for Comex silver futures to push above some daunting reservoirs of supply on the intraday charts.  The June contract duly obliged shortly thereafter, but as you can see in the May futures chart below, the rally left one key high at 18.91 recorded in January undisturbed. Although climactic buying missed exceeding that peak by just 2.5 cents, it was enough to make any selloff that followed a possible threat to the short-term picture. That threat was “actualized,” as they say, by this week’s steep selloff, but it remains to be seen how much more damage will be done. So far, it is minimal, and we therefore still expect the futures to hit a very bullish 21.53 by mid-June. That is our target for the July contract, and it was mentioned in last week’s commentary along with a secondary target at 20.21. At what point would our outlook turn intermediate-to-long-term bearish? That would take a print below 13.89 (!), since, according to the rules of our proprietary Hidden Pivot trading system, that’s what is required to turn the weekly chart bearish.  With respect to the daily chart,

A great lesson on camouflage, this session demonstrates why it is possible even for a relative beginner to hit ten winning trades in a row, and to do so without ever risking more than mere pocket change. By focusing on two very subtle buying opportunities – one in gold, the other in the E-Mini S&Ps – that occurred following steep declines that morning in each, we found a way to board nascent uptrends with calm confidence.