Friday, September 17, 2010

A Hidden Pivot at 576.19 looks safe to use as a minimum upside projection for the intermediate term now that its sibling midpoint at 469.72 has been well tested as a consolidation level.  Pivoteers may have noticed that this week's gains have pushed the futures above peaks from mid-May and early July, and although the rally is not quite impulsive on the weekly chart, it attests to the persistence and strength of buyers. From here there are just two more peaks to be dispatched, and the Gold Bugs Index could do it with a moderate thrust of just 20 points. There is also one additional hidden resistance at 540.61, but I proffer it merely as a trading point, not as a show-stopper.

I'd said the bad guys would be hard-pressed to hold Silver down, but their task grew doubly difficult yesterday when the futures exceeded a key high at 20.800 recorded back in July of 2008.  Doubters should take a gander at the weekly chart (inset) to see how a powerful rally can create irresistible impulse legs with each new thrust. This latest one has effectively revitalized the long-term bull and inured it to any damage shy of a pullback to below $14 (!).  The rally projects most immediately to 22.505, a number that was mentioned in the chat room the other day by more than one source.  The midpoint pivot with which is it is associated is 19.920, and we should therefore regard any pullback to that number as a gift to those needing to play catch-up..

The 1290.90 target given here earlier now looks like it can't miss, what with all three coordinates showing up as single bars on the larger intraday charts.  Portfolio traders and scalpers should take appropriate action when the futres get there, since a pullback from somewhere very close to the Hidden Pivot seems all but guaranteed.  If the rally pops through it by more than a point within an hour or so of first touching it, $1300+, here we come!  Our next price objective would be 1340.00.

The Indoos have lagged the S&Ps and must still take on two prior peaks before shorts are forced to throw in the towel. We'll use the 10920 peak from May 13 as our benchmark, bearing in mind that, to effect the strongest bullish signal possible, the rally must be uncorrected on the intraday charts once it exceeds the 10720 peak of August 9.

If you view virtually every rally as driven by short-covering, the market becomes transparent and comprehensible.  Right now, for instance.  Mere bullish buying could never have pushed the futures above the summer highs noted here earlier simply because there is no bullish buying going on, save by Kudlow.  But because every day ends with a flurry of short covering, it was only a matter of time before DaBoyz generated enough of it to carry into the night session.  That's where things stand at the moment, shortly before midnight: The futures are trading at 1127.00, a tick off the night-time high, having surpassed two of three important summer peaks on zero volume and unobserved by all but a relative handful of traders. The final peak I'd mentioned at 1133.50 remains to be conquered, but bears shouldn't get their hopes too high that it will survive.  At some point in the near future, this rally will be cited by Obamuck and the pundits as evidence that the economy is recovering. In fact, the rally is little more than a manifestation of the epic fraud that has postponed the financial system's day of reckoning.

(One of the sharpest investors we know, a local financial advisor who is also a close friend and collaborator of economist David Rosenberg, thinks the housing market is nowhere near a bottom. In the essay below, one of several we have presented by the same author, he amply supports his thesis, pausing along the way to draw an insight from the Kodak Super 8 movies that his grandfather used to run in reverse.  RA) Over the last few weeks there have been a larger number of articles written about the housing market. The increased volume is probably attributable to recent data showing that home sales have dropped off sharply since the Home Buyer Credits expired. In addition, we are witnessing increasing foreclosures and a general lack of success in mortgage modification efforts. Certainly economic recovery and housing market recovery go hand in hand, so the spin on housing has tended toward the affirmative in most analysis. Most articles place an emphasis on affordability, which is at or near record levels by most measures, as the primary reason for optimism. The primary deterrents to a more robust turnaround (in addition to the unemployment dilemma) are typically identified as more stringent underwriting conditions and a deflationary mindset among qualified buyers, causing them to hold off on making offers. What seems to be missing in the analysis is the obvious fact that the overwhelming majority of potential homebuyers also have one to sell. While that has typically been the case, there are several factors that make it substantially more critical to market dynamics now than it has been in the past. When we were experiencing a secular bull market in real estate combined with a secular credit expansion, having a home to sell was an enormous positive because the capital gain on the