Thursday, September 16, 2010

Just because there are no bulls besides Kudlow, and not even the prospect of good economic news, does not mean DaBoyz cannot take the market higher. Watch how they continue to tease and torture shorts near the summer's highs.  A few more days of it and the hook will be set.

We hold 800 shares with an adjusted cost basis of 12.95 against eight October 26 calls shorted for 1.00. Continue to bid 0.58 to cover half the calls and 0.48 to cover the rest. Check back intraday, though, since I may recommend covering them on a buy-stop near 0.80 if SLW turns unstoppable once again. _______ UPDATE (4:24 a.m. EDT): SLW is looking pretty feisty at the moment, so let's plan on covering all of the calls with a 0.92 buy-stop, o-c-o with a 0.68 limit bid . That means that if the calls trade 0.92 or higher, you buy them back with a market order, but if they trade 0.68 first, that's where to get 'em in.  _______ FURTHER UPDATE (12:31 p.m. EDT):  We scratched the calls, covering them for 0.95 or less.  For what it's worth, Comex Silver's weekly chart points toward an important intermediate-term high at 22.50, so there's plenty of upside left.

Some have written off T-Bonds and see a bear market in its larval stage. (Bear larva? Now there's an atrociously mixed metaphor.)  We'd feel the same way if we were to reflect for even a moment upon all of the good reasons this should be so. But the technical evidence comes first -- always! -- and it is saying, "Not so fast, you bears."  Notice in the accompanying chart how the crystal-clear ABCD downtrend failed by a significant margin to reach its target. To be sure, the failure will not become official until such time as the bounce exceeds point 'C' at 133^12. However, on the basis of the moderately robust bounce so far, it is reasonable to infer that the downtrend has failed. That would be bullish if true, and it would portend new recovery highs above 135. We will await further evidence to clarify a speculatively bullish picture, but that's what it is.

Three days of unmitigated, chicken-hearted slack attest to the grave difficulty DaBoyz are having popping the futures above the summer-solstice and early-August highs near 1120.  However, instead of praying for good news, of which there will likely be none, they will simply continue to jerk shorts up and down until they've had enough. When the bears capitulate, it will squeeze the futures above external peak #1 at 1122.00, and probably #2 at 1124.50. We'll require a bit more than that, though -- i.e., a breach of the look-to-the-left peak  at 1133.50 -- before we join the revelers up to cliff's edge.

A tiresome game, this consolidation -- even with gold turning on the proverbial dime relative to our short-term targets. The nearest at the moment -- a possible opportunity for bottom-fishing by night owls -- lies at 1265.40, the midpoint support of the pattern shown.  As was the case yesterday, bottom-fishing there, or at its sibling 'd' target, is worth three tick's initial risk.  If the midpoint is breached by more than the stop, assume the correction will continue to 1260.90.  _____ UPDATE (1:47 p.m. EDT):  The turn we were expecting came from 1266.10, so we missed the low by a little bit. Keep in mind that it is normal for strong uptrends such as we've been seeing in Gold to generate retracement abc's that do not quite reach their midpoints or 'd' targets.  Because of this, you'll sometimes need to adjust, using camouflage at times, if you want to be assured of getting aboard.

The rally faded in the stretch in night trading after falling just shy of a 20.80 target -- and another of a larger order of magnitude at 21.00.  No matter, though -- SI is just giving the bad guys a breather, because they're going to need it.  Portfolio bulls should take precautions at 21.00, but scalpers can short this Hidden Pivot with a tight stop-loss, since it looks very likely to repel the rally to a tradable degree.  _____ UPDATE (12:42 p.m. EDT):  Check out the chart I've just added if you want to see the logic for an intermediate-term high at 22.505. That implies a move above March 2008's watershed peak at 22.055, but we can be confident that resistance will be tested, and that it will eventually give way.