Wednesday, September 29, 2010

On the daily chart, a major Hidden Pivot at 558.55 can serve as a minimum upside objective for the near term.  However, if it's exceeded on a closing basis, or intraday by more than a couple of points, we should infer that the 576.19 target of an even larger pattern is in play. Both patterns are shown in the accompanying chart, and in each instance the rally had little trouble getting past the respective Hidden Pivot midpoint. This bodes well for a presumably imminent attempt to surpass the  watershed peak at 516 recorded in December 2009, although I don't expect this feat, which could be achieved as early as today, to evince much strain.)

The May 12 peak at 1160.75 that I've highlighted in the chart remains crucial to determining the ostensible health of the bear rally begun in July. The futures already missed an opportunity to impress us with an uncorrrected thrust through that resistance when they pulled back 27 points last week. That allowed them a running start at 1160.75 that has needed to be corrected as well.  While we should love to see this limping lump of brick dust fail to clear the peak altogether, and for the Kudlows and institutional miscreants of the financial world to be trapped like the Egyptians at the Red Sea, that is probably too much to hope for.  Shorts remain to be squeezed, and even to be stampeded, if the news should turn less than horrific for a week or two, and so we should expect DaBoyz to eventually effect a distribution above 1160.75. Regardless, we'll take things one day at a time, which means we are focused on an 1159.75 Hidden Pivot rally target right now, subject to midpoint cross winds at 1143.50.  Said midpoint has already been exceeded by 2.50 points, so don't hold your breath waiting for a trend failure here.

We remain focused on a 22.505 target that comes from the weekly chart (see inset), but keep in mind that buyers will need to push the futures past a daunting peak at 22.055 recorded in March of 2008 that would have trapped bold legions of Silver bulls.  They will be laughing in the bad guys' faces if they can close Silver above that peak today or tomorrow, but just getting as close to the peak as the futures have done already suggests buyers are not intimidated. You should also take time to notice on the weekly chart that the rally from late August's low at 17.785 is as yet unpaused, and that a further extension above 12.055 without a pause will create a very powerful impulse leg -- powerful enough, in fact, to fortify the futures against a corrective move down to as low as 16.640.  For today, traders can short 20.505 via a two-contract offer a tick below that price, and a stop-loss at 20.525.

(I wrote here recently that the stock market is almost completely driven these days by algorithmic trading and prop-desk automotons who couldn't care less about whether the ups and all-too-infrequent downs of the broad averages accurately reflect "reality." Following is a post from the Rick's Picks forum by "3 Lions" that nicely frames the insanity of it all. The theme is especially timely given the mini flash-crash perpetrated in bullion Monday night. This brazen, quasi-criminal shakedown not only allowed DaScumballs –aka the Night Shift – to steal gold and silver futures for far less than they were to fetch later that morning in more liquid markets, but to pick off widows and pensioners in some key stocks that trade round-the-clock, such as Apple, IBM and Google. RA) Unequivocally, we have reached a watershed in the history of the U.S. stock market and therefore global stock markets. Never mind whether traders or investors are making money or not; the stock market has now become nothing more than a casino where the "table" almost always wins.  Business-news channels in the USA are nothing more than offshoots of Hollywood sitcom studios which 20 years ago would have been rejected for children's TV as being too dumbed down.  The U.S. stock market has become so far detached from reality that justifiably it cannot be called a stock "market."  Those of us who believe that one of the best ways to keep proper tabs on the financial charade is by perusing the consistently accurate touts in Rick's Picks should spare a thought for those still bogged down in ancient trading methodology, such as Elliott Wave analysis, that began life when the stock market was indeed a "market."  A trading/investing friend of mine had 24 years in a row of profits until 2009/2010, when his proprietary trading method

Nothing in the bullish picture has changed, notwithstanding the quasi-criminal shakedown yesterday that spiked the futures down to 1276 so that DaBoyz could enjoy a fleeting looting spree.  Now, just above, there are a couple of minor Hidden Pivot rally targets given here earlier that lie, respectively, at 1313.50 and 1314.90. However, 1340.00 is a much more important target where will have to pay close heed, and if it's hit today or tomorrow we should plan on shorting with the cover of camouflage on the lesser charts. Keep in mind, however, that although this target seems likely to put up a fight, there is no reason whatsoever to think Gold will not eventually get past it.  If that happens within minutes or even hours of when 1340.00 is first touched, it would strongly imply that even higher targets are about to be reached, and soon. To be more precise, Hidden Pivots at 1381.70, and at 1400.80, will be in play if 1340.00 gives way easily. Both can be easily found on the monthly chart.

Bullion investors breathed a sigh of relief at the end of the day, but what if gold and silver had continued to fall instead of whipping around and inflicting such delicious pain on the bad guys? You should consider yesterday's whipsaw an air raid drill, since the next time around, the selling might turn out to be the real McCoy. Specifically, we have a longstanding target in Silver at 22.505 (and another at 1340 in Gold) that stands ready to provide more-daunting resistance than the 21.635 pivot we leveraged for a nice scalp-trade the other day.  Ideally, 22.505 will prove to be another pushover.  But we will still have to be ready for whatever the bears throw at us once it's hit, so don't let yesterday's exuberant turnaround distract you. Incidentally, we'll take a very close look at the E-Minis and Gold when stocks open Wednesday morning. Join me for a live trading session that will start at 9:15 a.m. EDT.  This one will require no password, so bring a friend. Further details will be announced in the room just before the start time.