Monday, June 7, 2010

July Silver looks like it could grope its way down to as low as 17.000 (a Hidden Pivot) in search of traction, but bulls would gain the upper hand, at least for the near term, if they can surpass the 17.645 peak recorded in the throes of Friday's selloff.

Gold was acting too timid Sunday night to suggest it's ready to tack a follow-through onto Friday's powerful reversal.  However, the neutral short-term outlook would brighten considerably on a print today at 1231.20, since that's where the hourly chart turns bullish. Maximum upside target for the near-term if buyers romp: 1261.80.  At the moment, however, they look like they'd rather just mark time for at least the next few days.

Monday's E-Mini S&P forecast, as well as today's commentary concerning "Hints of a Bottom," leave plenty of room for selling, since the ES target implies the Dow Industrials could take a 500-point header before they finally turn around.  There are two other Hidden Pivot supports that suggest it might not be that bad, but neither will exactly be good news to bulls.   Bears have no reason to let them off the hook unless buyers can muster a thrust to at least 10489, where a look-to-the-left peak was formed May 19 on the way down.

The futures have been down as much as 14 points Sunday night. This would be just a routine shakedown if not for the fact that the so-far low exceeded  the key bottom at 1055.50 recorded ten days ago.   A subsequent rally has generated a little short covering, but the action looks so feeble that one might infer bears are not very nervous about starting the week with big stacks of chips on the "Don't Pass" line.  I've drum-rolled a target at 1022 in today's commentary, and you can nibble there with a tight top-loss, but keep in mind that a breach of that Hidden Pivot by more than 1.50 points would imply more downside to at least 1014, or possibly even to as low as 997 (a back-up-the-truck number for bottom-fishing).  FYI, bulls would need to hoist this cinder block above 1088 today to mount a credible threat.

The mirage of economic recovery conjured up by our political leaders and a credulous news media dimmed and flickered in the harsh light of reality on Friday, when grim employment figures for May sent stocks into one of their steepest dives of the year. Although 431,000 jobs were added last month, most of the workers were census-takers hired temporarily by the government.  Even that figure evidently was ginned-up, since it appears that many of the workers had been laid off during intervals when there was little to do, only to be rehired later and recounted. But the bottom line for private-sector employment was a paltry 41,000 new hires, the smallest increase since January. Wall Street did not exactly take the news in stride, and the broad averages fell as though the data had caught most traders by surprise. Index futures had head-faked overnight to trap bulls, but by day’s end the blue chip Dow Average was down 323 points.  We would caution bears against becoming overly confident, however, since there are several technical factors coming into alignment that augur a potentially sharp reversal in the broad averages and some important trading vehicles that we track. For one, at Friday’s low of 1059, the E-Mini S&Ps was within 37 points of a longstanding “Hidden Pivot” target of ours at 1022. That’s equivalent to about 300 more points in the Dow, and it could easily be reached this week if sellers continue to hit stocks on Monday morning as they did on Friday. Bullion ‘Vulnerable’ The euro may also be close to an important turn after having been savaged since mid-April, when the currency hovered just above $1.37. On Friday, heavy selling drove it below 1.20 for the first time since 2005. The precise intraday low on the June Comex contract was