Tuesday, June 8, 2010

The Diamonds should start plummeting toward a Hidden Pivot target at 93.50 any day now. Although I'd rather try to get short into an upswing, we should make a very small bet today so that we won't need to feign indifference if the plunge commences without warning. Accordingly, I'll recommend bidding  2.75 for a single July 96 put.  That's about what they might sell for if the Diamonds have to catch up to the E-Mini futures at their Monday-night levels (i.e., up about six points). _______ UPDATE (3:30 a.m. EDT):  The E-Mini S&P has been up as much as 13 points tonight, so let's bring our bid for the puts down to 2.15.

DaBoyz have joined forces with nervous shorts and sundry other whack-jobs this evening to recoup (so far) 7 points of Monday's loss on the usual, almost non-existent, volume. This doesn't much affect the bearish targets we identified here yesterday -- 1022, 1014 and 997 in succession -- but it could set up a good opportunity to short this hog into illusory strength on Tuesday.  Night owls can try a more delicate maneuver, shorting 1057.00 with a 1057.75 stop-loss.  This  very speculative trade is based on the pattern shown in the chart._______ UPDATE (1:26 a.m. EDT):  This trade has been an easy winner so far, since the futures head-faked to our number exactly, 1057.00, stopping out the 1056.75 high made two hours earlier before dropping back to 1054.00.  Cover half the position between 1054.00 and 1055.00, using a fixed stop at 1056.75 for what remains. (I'll assume two contracts for your further guidance.) If the futures fall to 1052.00, cover another contract and swing for the fences with the short contract that's left.  _______ UPDATE (3:33 a.m. EDT): A  spike to 1061.00 stopped us out overnight for a theoretical gain of about $300.

Silver did everything we asked of it and more yesterday, setting up a likely push, for starters, to 18.580, a Hidden Pivot midpoint and the closest such resistance just above.  We should set the bar somewhat higher, however, just above an important "external" peak at 19.145 recorded on May 18 when the futures were falling, to tell us when the correction from mid-May's highs has ended. If the implied rally is truly impulsive -- meaning it is unpaused between the two peaks labeled in the chart -- we can infer that Silver is finally on its way to the promised land above $20.

Late Monday night (EDT), Gold was holding onto most of the day's gains, trading just $6 off  the highs. My immediate target is 1261.80, as noted in today's commentary, and the implied surge should be presumed under way following a "booster-stage" rally of at least $8.60 beginning from anywhere north of 1225.

Gold quotes lurched sharply higher yesterday, and we take it as especially bullish that the news media tripped over their own feet trying to explain why.  Reuters reported that prices surged because of “safe-haven demand due to ongoing fears about euro zone credit contagion.” How’s that for  lame analysis?  The Wall Street Journal didn’t do much better:  “Gold made a sudden, sharp move higher, a jump many attributed to  fears of Europe’s sovereign debt crisis.” Shouldn’t someone point out to these guys that the euro held its own yesterday for a rare change and that that is surely an odd way for traders to have expressed their supposed anxiety over Europe’s financial fate? Another talking head who apparently didn’t get it was Bart Melek, a global commodity strategist for some firm: “It’s a bizarre move,” Melek told the Journal. “Fundamentally,” he said, “we really have not seen many things today” that could justify such a big jump. Lest Melek and the others lose sleep over bullion’s vexatious vault, we’ll spell it out for them in just one word:  B-E-C-A-U-S-E!  “Because why?” Melek might ask. Just because, we’d reply, leaving it at that. Sometimes explanations need be no more complicated than that, and this is one of those times.  And anyway, anyone who still wonders why gold has taken a big leap on a given day must have been living on Mars while the yellow metal’s price quintupled from $250 to $1250 over the last ten years. They are the very same geniuses who have no difficulty explaining each and every 200-point rally in the Dow:  “The strength of the economic recovery is what did it,”  they will tell you – and never mind the fact that it is the banking sector alone that has felt any real improvement. Brace for

Our friend Phil Calderone sent us a note recently asserting that Hecla Mining (NYSE: HL) and Central Fund (AMEX: CEF) were as close to a "sure thing" as any bullion plays he's seen in years. From a Hidden Pivot perspective, CEF became a speculative "buy" this morning, although Hecla, trading for 5.24 at this moment, would need t hit 5.37 to create an equally buyable, bullish impulse leg on its hourly chart.  Here's Phil with a full explanation that he sent me on May 20 -- and caveat emptor! “It has often been said, that in life, there are ONLY two sure things. Death &Taxes! When it comes to betting on sports or speculating on stocks, real estate or even people, there is no such thing as a sure thing. Given that proviso, I have identified a number of very profitable stock picks over more than 40 years of studying the markets. I believe that a situation currently presents itself as one of the best risk reward opportunities in a number of years. Anyone who knows me is familiar with my ongoing recommendation, especially since 2001, of gold and silver as a protector and grower of wealth. My core recommendation since that year, when I first came across and researched Central Fund of Canada, CEF, started with buy recommendations @3.16. I have continuously recommended it multiple times at various prices since and continue to believe that money should be held in shares of CEF, instead of bank accounts, bonds, real estate, stocks etc. that will otherwise be ravaged by the continuing decline of the dollar. The “close as it gets to a sure thing” trade is a stock, that has the usual risks of any stock investment. However, given the company fundamentals, my stock chart analysis, and the fact that Silver is the most undervalued