Monday, October 25, 2010

Practically everything but the dollar was up Sunday night, and although there was little exuberance behind the buying in index futures, Gold and Silver contracts were well off the launching pad. Neither move is impulsive yet on the hourly chart, but I've provided benchmarks for both to help you recognize when bulls are in the clear.

Look for a tradable peak at exactly 1192.25 on the next thrust.  That's a single tick lower than the target given here earlier, and it can be shorted with a stop-loss as tight as 1193.25.  If you're looking for a way to enter with the uptrend, consider doing so via camouflage on a pullback to 1174.75, the 'X' entry point of a lesser pattern.  The midpoint of the larger one is 1182.75, and a decisive move past it Monday morning, particularly on a gap, would all but guarantee a move to at least 1192.25. ______ UPDATE (2:19 a.m. EDT):  Okay, I'll admit it: The idea of hacking off my right arm if the futures failed to rally to at least 1192.50 seemed pretty ghastly. Fortunately, I won't have to make good on my promise from last week, since the futures, driven by the usual gang of Sunday night pederasts, drivelers, lobocks, and parepithymiacs, have spiked to exactly 1193.00 so far this evening, triggering the short advised above.  Since three ticks were risked theoretically at the outset, we needed at least three time that -- or nine ticks (2.25 points) -- on the pullback to implement a no-loss-likely trailing stop on a single-contract position; and/or to take a partial (50%) profit on a multi-contract position.  In either case, if you want to be ultracautious, consider stopping yourself out if a bullish impulse leg is formed on the three-minute chart; on the five-minute chart if you want to be slightly more daring; or above the 1193.00 high if you want to swing for the fences.  Meanwhile, since the futures have already pulled back to 1188.50, making the short profitable on paper, I'll turn the management of the trade over to you and say good night!  

With China’s central bank in tightening mode, the bad guys had their best chance in months to knock down the price of gold last week. Their best efforts proved feeble, however:  When the dust had settled, gold quotes were down just five percent from the record $1388 peak recorded on October 14.  And although Silver fared somewhat worse, falling eight percent over the last seven days, even in the throes of this relative weakness, Comex futures resisted getting shoved lower for more than a single day at a time.  “Up” days alternated with “down” days, suggesting that the playground bullies of the precious metals world – i.e., Fed-sanctioned bullion bankers -- were having trouble suppressing the price of precious metals, gold in particular.  Indeed, if last week’s moderate decline was the worst damage they could inflict on bullion when the news was on their side, then we shouldn’t doubt that precious-metal prices will soon be bounding higher once again. The announcement last week that China’s central bank would boost the yuan lending rate by 25 basis points was like a kick in the teeth to global markets that had been wafting blithely skyward on the prospect of perpetual global easing. China has good reason to shun the party, however, since, even in weak fiscal quarters, GDP growth is running at eight percent or better. Last week’s announcement was an attempt to rein in speculation and to quiet inflation, and it should have surprised no one that bourses around the world reacted hysterically, as is their entrenched habit even when the news is stale from anticipation. This time the dollar’s response was worse than merely hysterical, however, since the greenback initially rose sharply on news that should have caused it to fall (i.e., stronger yuan = weaker dollar).  Go figure --

If this year's upward drift in rates on the 30-Year is going to continue in earnest, or perhaps even take wing, we should see a pop this week or next above the 4.138% peak recorded in early June when interest rates were correctively on the way down.

A Hidden Pivot support at 1291.60 still beckons as a logical place for this now seven-day-old correction to bottom.  However, we should be alert to the possibility of a decisive turn from somewhere above it, since the futures were struggling on Friday to reach even the 1314.25 'c-d' midpoint of a lesser downtrend. They would more than merely harass bears this week with a print exceeding 1158.90, a "soft" peak on the hourly chart that I identified here earlier.

The somewhat muddy midpoint support at 77.120 shown in the chart will make a suitable minimum downside target for now, but if it's breached decisively, look for the slippage to continue down to at least 76.500, its 'D' sibling.  Any breach of the midpoint by more than just a few ticks would be further evidence that the rally begun 11 days ago is likely to go nowhere.

A Hidden Pivot support at 22.565  is equivalent to the 1291.60 correction target that I've flagged in December Gold.  We  can use it as a minimum downside objective for the seven-day-old correction, but if you want to try bottom-fishing with a very tight stop-loss, I'll suggest doing so at 22.490, a promising 'd' target that comes from a true one-off  'a'  high (see chart).  Alternatively, any countertrend rally will start to look encouraging at 23.600, a tick above a "soft" external peak on the hourly chart. ______ UPDATE (2:42 a.m. EDT): The futures are on a tear tonight, having reached a high so far of 23.710. The rally doesn't amount to much on the hourly chart -- that would take a print at 24.410 -- but on the 10-minute it is bullishly impulsive.  There are no immediate rally targets I can offer that you could take to the bank, so to speak, but I'll suggest using a so-so pivot at 23.830 as a minimum upside target for the very near-term.