Friday, October 8, 2010

Respecting, or perhaps fearing, the employment report due out Friday is properly the work of imbeciles, so don't look for me on the sidelines shouting and cheering as the momentous announcement approaches.  Thursday night, signs were bullish for bullion -- but also for index futures, suggesting things could return to normal despite the day's scheduled Big Event.

Savor the 16-point pullback from within two ticks of our 1163.25 target for yet a few more hours, because this lovely bearish moment is not going to last.  As I attempted to make clear in yesterday's tout, any rally exceeding the May peak at 1160.75 would be warning shorts to batten the hatches.  From a Hidden Pivot perspective, we should watch to see how the pattern in the chart plays out, since an imminent resurgence would be telegraphed by a bounce from whatever midpoint support forms. That midpoint can be bottom-fished with a tight stop, by the way, since such lazy, looping patterns as this one is shaping up to be are conducive to precisely defined opportunity. ________ UPDATE (8:59 a.m. EDT):  Ahhh, fascinating.  Much like the chart I'd drawn shows, the futures came down to within three ticks of the midpoint support, which at the time was 1151.25;  then, they bounced three points, to a high of 1154.00 at 8:27 a.m. But if our eyes -- and Tradestation data -- are to be believed, what came next was right out of Friday-Follies looney land: a swoon down to 1145.50, then a rocket ride up to 1158.75 -- all on the alleged "news" that unemployment had held steady at 9.6%, and that  employers had cut more jobs than the usual idiots were expecting.

The futures were skittering sideways in a tight-range after-hours, presumably looking for a chance to reverse yesterday's negative polarity. The visual tedium of the price action may hold some excellent low-risk opportunities for night owls, since said tedium is manifest in a veritable forest of minor prior peaks, each capable of engendering the subtly bullish impulse leg we require to board with relatively little competition.  I'd suggest using the five-minute chart (shown) to find such opportunities as they occur.

Veteran Pivoteer Steve Scheler posted a pattern in the chat room yesterday that nicely -- and precisely -- explained the 1366.00 top in December Gold. It came from the pattern shown in the accompanying chart, with 240-minute bars that highlight the enticing similarity between k-A segment and B-C pullback. You can also see that the futures did not fall nearly far enough yesterday to create a bearish impulse leg on a chart of this degree; indeed, even on the hourly chart sellers turned chicken just shy of a wee look-to-the-left low at 1324.80.  My hunch is that they'll have difficulty extending yesterday's drubbing into a multiple-day affair.  In any event, to gauge the strength of any selling, use the hourly chart and the one-off 'A' at 1362.80 to find a telltale midpoint support.  If it's easily breached, and especially if the 'D' target of the retracement is reached, that would imply weakness is likely to greet the new week. ______ UPDATE (11:37 a.m. EDT): Gold has leapt into the faces of the bad guys today, and, happily, is tearing out their eyeballs as I write these words. We'll need to see a 1372.90 print to completely devour the bears, bones and all, but it feels like it'll come.

Bullion bears had better not get their hopes too high in the wake of yesterday’s nasty plunge in precious metals. The price of an ounce of gold on Comex fell $40 from high to low, or about 3%, and silver fared even worse, falling from 23.53 to 22.47, or nearly 4.5%.  We see this action as purely corrective, however, since none of the factors that have been driving silver and gold higher have changed. For starters, the Fed remains committed to massive new rounds of quantitative easing, which can only feed on itself by driving buyers away from future Treasury auctions. The global financial system is further roiled by Japan’s abortive efforts to hold down the yen, and by China’s simultaneous efforts to push it up.  Bottom line, the world’s major currencies, all of them fundamentally worthless, remain in a hopeless state of chaos relative to each other. If that is bearish for gold and silver, then this week’s toxic spill in the Danube is bullish for Hungarian tourism. We’d anticipated short-term trouble for bullion in yesterday’s commentary, which bore the following headline: A Hair-Trigger Alert for Bullion-Watchers.  The trigger we were referring to was a rally in the U.S. dollar, which has been in a relentless decline since early June. Were the dollar to reverse direction with a dead-cat bounce or perhaps something more, that would put downward pressure on gold and silver prices. This dynamic was present yesterday to some degree, although the NYBOT Dollar Index (DXY) began the day on weakness, breaking beneath some Hidden Pivot supports we’d flagged for subscribers. This occurred overnight, but when U.S. markets opened Thursday morning, the dollar reversed sharply, and that’s when gold and silver began to fall in earnest. Some Clues Although it’s impossible to predict exactly how far the