Tuesday, October 5, 2010

Bullion futures looked like they were rarin' to go late Monday night, and December Silver was registering a minor breakout as we went to press. Index futures, on the other hand, looked like they were being sat on by some size offers.

December Silver appears to be breaking out at this very moment with a small upthrust to 21.930 that could conceivably set up a camouflage opportunity. It will probably either be spent or invalidated by the time you read this, however, and that's why I have not marked this tout as "actionable." From a Hidden Pivot standpoint a more important breakout would come at 22.080, and a close above that midpoint pivot would presage the move to 22.505 that we've been anticipating. _______ UPDATE (2:06 p.m. EDT): The futures have just three, closely-spaced, targets remaining before they exhaust the possibilities of the daily (non-continuous) chart:  24.915, 25.165, and, finally, 25.280.  Those targets are tied to points 'A' recorded on, respectively, 12/5/08, 11/20/08, and 11/13/08.  Once the highest number has been exceeded, we would need to move onto weekly charts to project even higher highs. For now, though, we'll stick with what we've got.

December Gold labored unsuccessfully all day to reach a correction target at 1311.10, suggesting that the bad guys are finding it increasingly difficult to orchestrate the fright-mask declines that were so common not long ago.  My minimum upside target remains 1340.0 in any case,  but there were no subtle camouflage opportunities beckoning late Monday night. A print at 1316.60 would signal a breakout on the lesser charts, but it would be too obvious for our purposes, and probably yield a troublesome liftoff. ____ UPDATE (11:13 p.m. EDT): The futures have managed 1342.60 so far today, and although a $2.60 overshoot may not sound like much, it is sufficient for us to infer that the next bullish milepost, a Hidden Pivot at 1381.70, is in play.  It comes from a pattern easily found on the daily chart: A= 1048.20 ( 2/5/10); B=1270.60, and C=1159.30.

The yen took quite a beating yesterday, but the futures are still within easy distance of savaging bears who pounce prematurely. Specifically, if the Deceember futures rally to exceed a minor midpoint resistance at 1.2019, a follow-through to at least 1.2068 over the near term would become likely.  Night owls should look to go long using camouflage on the 10-minute chart or less. There are plenty of prior peaks to confuse the hoi-polloi, so a "safe" entry will depend mainly on applying the rules rigorously.

We'd almost forgotten what a day of selling was like when unrelieved by the hysteria of a short-squeeze at some point, usually in the final hour. It's a change, for sure, and so we'll want to pay close attention to any further signs that buyers may be suffering from terminal fatigue. The action Monday night was too screwy to parse, since there appeared to be a rather large seller suppressing any follow-through to the machine-driven upthrust that ended Monday's session. Anything below 1144.00 is bearish, however, since it follows a bearish impulse leg begun at that price when yesterday's 1127.00 low breached last Thursday's by a single tick.  This is bearish, as I have noted, though not quite ominous, not yet. ________ UPDATE (8:50 a.m.): The futures have rallied overnight to 1142.25, but we'll set the bar at 1146.75 to separate success from failure as far as DaBoyz efforts to get a short-squeeze going.  That's where a bullish impulse leg would be created on intraday charts of higher degree.

Now comes a survey that says the American public has soured on free trade. This is one populist sentiment that few politicians have the guts to debate, let alone oppose.  Under the circumstances, perhaps we were wrong when we wrote here the other day that a move in Congress to sock China with punitive new tariffs would fail simply because the destructive consequences of the Smoot-Hawley Tariff of 1930 are too well-known. Some have even argued that Smoot-Hawley, which raised tariffs on more than 20,000 imported goods to record levels, is what triggered the Great Depression. Whatever the case, economists in particular -- even such as Alan Greenspan, who, on voluminous evidence, couldn’t pass an Econ-101 midterm exam -- seem to understand that tariffs are generally a bad thing, at least in theory. Although tariffs are intended to level the playing field and keep the U.S. from getting flooded with cheap foreign goods, the risk is that they will provoke retaliation and, ultimately, a trade war that can devastate manufacturers on both sides of the Pacific. From a purely economic viewpoint, one might ask what’s the harm if we let China sell us merchandise for less than it costs them to make it?  Won’t that only benefit consumers? We pose these questions rhetorically, however, since there most surely is harm if the Chinese (for one)  are deliberately underpricing goods in order to put our manufacturers out of business.  Succeeding at this would give their exporters monopoly pricing power, meaning they could charge as much as the traffic will bear for the goods they sell us. Even so, we risk having our own manufacturers grow less competitive, and ultimately obsolete, if tariffs are too high. Ideally, they should be just high enough to give domestic manufacturers some breathing room while they