Wednesday, May 19, 2010

Check out today's tout and chart for the Dollar Index, since it's possible to infer the greenback is developing thrust for a mini-moon shot into the low 90s.

I've been projecting a tradable low at 10258, a Hidden Pivot, but any bottom-fishing should be tied to a camouflage entry strategy using the 3-minute chart or lower. That number remains my minimum downside target for the near term, and it looks likely to be reached this morning if sellers show any gumption at all.

The Dollar Index has just embarked on a fresh, bullish impulse leg with immediate upside potential to 87.99, the Hidden Pivot midpoint of the pattern.  If it breaks loose, however, and closes above that number, that would imply more upside over the near term to as high as 90.06.

We hold 800 shares with an adjusted cost basis of 11.75 against eight May 18 calls shorted for 0.64.   Continue to bid 1.84 to try to get the calls back.  This corresponds to a minor downside target for today of 19.83.  ______ UPDATE (12:57 p.m. EDT):  Our patient, two-week vigil was rewarded with the worst timing of any option trade we've attempted in recent memory, since we wound up covering the calls just as this morning's avalanche was starting.  Live and learn, as they say.  We still have a $4200 paper profit on our position and a new cost basis of 12.95.

A print at 19.175 would turn the five-minute chart persuasively bullish (see inset), but if the futures surprise with a swoon, a Hidden Pivot support at 18.405 is where buyers should back up the truck.  Stink bids are advised there with a stop-loss as tight as four ticks. ______ UPDATE 12:53 p.m. EDT):  The futures took a 60-cent bounce off an interim low at 18.410 -- not quite close enough to our back-up-the truck number to fill a precise bid.  They subsequently relapsed to 17.920, and this is a bearish sign going forward, at least for the near term.  If you bought with a four-tick stop-loss as advised, you exited with a small loss. I wouldn't suggest trying again until such time as 17.780 is reached, since that's my minimum downside objective for the moment.  However, to make entry with an uptrend, you could look for a camouflaged rally on the 5-minute chart.  That would allow you to get long even if the futures don't come all the way down to 17.780.

As of around 4 a.m., gold was all over the place but trending gently higher nonetheless.   Earlier in the day, the futures made a tentative bottom at 1206.00, just $1.50 above the 1204.50 pivot flagged in a tout update intraday. We'll continue to use 1230.20 as a bullish trigger on the lesser charts, since a print there would create a minor but trustworthy impulse leg.  More immediately, the minor trend projected to 1217.20, but any overshoot would portend still more easy upside for the bulls. ______ UPDATE (12:16 p.m. EDT): Perhaps the selling is over for a  while, since the futures have bottomed a dime off the low of the following, now-obvious, pattern from the 30-minute chart:  A=1249.70, B=1206.60, C=1229.60 and D=1186.50.

Yesterday's tout nicely anticipated the futility of the  buying spree that began the day. It also left unchanged our warm and fuzzy feelings for 1098.75, a Hidden Pivot midpoint that has served as a minimum downside objective in recent  days regardless of whether the spirit of the moment was bullish or bearish.  Bottom-fishing at that support should be attempted only with camouflage, meaning entering at the 'X' of an abc uptrend on the lesser charts.  If the futures breach the support by more than 2-3 points however, you can infer that the sellers have more business to accomplish. ______ UPDATE (12:29 p.m. EDT):  The forecast hit a dead-center bullseye, since the futures have bounced twelve points so far today off a low at 1098.75.  Camouflage turned out not to have been needed to get long in this instance, but the tactic if used could not have failed to produce a stress-free winner.  Bullseye aside, keep in mind that we used the target all along as a minimum downside objective, and it therefore served the larger purpose of keeping us correctly oriented these last few days, even during at the superficially strong rally noted above.

When the euro staged a brief rally the other day, we professed to have been vexed. Why, we wondered, should there be any euro buyers at all at these levels – currently around $1.20 U.S. – when even the village idiot knows the currency is on its way down to 80 cents or lower? Of course, it’s not the little guys who have been goosing the euro into fleeting rallies the whole way down, but rather the central banks. And their perspective is quite different from that of Joe Sixpack;  for although Joe can once again fantasize about being treated like a high roller on the Champs Elysee, and of eliciting smiles rather than scowls from Parisian bellmen, cab drivers and waiters, the central banks of the U.S. and Asia see only a sovereign competitor stealing an unfair advantage over their own exporters. However, we somehow doubt that the folks at Daimler Benz and BMW will see it that way. They and other domestic manufacturers have struggled to hold the line on prices as the euro nearly doubled in value off an 83-cent low almost a decade ago. Now, with currency values being driven by factors wholly unrelated to trade in actual goods and services, the Germans undoubtedly sense that the U.S. dollar will fare no better than any other paper currency over the long run. And so it must be unsettling for them to watch helplessly as the greenback ascends for no good reason, if only temporarily, while the dream of a federated Europe sinks with the euro. Indictment-Proof Assuming they understand this, it seems obvious that the Germans and their eurozone neighbors will sooner or later come to recognize gold’s primacy as money. They quite obviously failed to do so yesterday, however, sitting idly by as the Dark