Wednesday, October 27, 2010

Bullion and indexes futures were moderately lower early Wednesday morning, dragged down, evidently, by weak markets in Asia and Australia.  As of 2 a.m. EDT, there did not appear to be any compelling opportunities for night owls.

Yesterday's nasty selloff exceeded a clear Hidden Pivot midpoint support at 130^28 by 12 ticks, implying there is more downside to come over the near term.  The 'd' sibling of that number is 128^25, which we'll use for now as a minimum objective. (We should also allow for a bounce from 129^28, a Hidden Pivot support of less clarity.) If the futures do indeed fall to 128^25, it would refresh the downtrend on the daily chart, with bearish implications for weeks to come if not longer.

It's all been downhill following an early-evening rally spike that extended Tuesday's regular-session gains.  Unfortunately, the thrust died just short of some small peaks recorded early last week on the way down, thereby denying bulls the minor impulse leg that would have kept the rally going.  To avoid taking any unwarranted encouragement, we'll set a benchmark for today at 24.410, a tick above the peak shown in the chart.  Otherwise, the December contract would have to fall all the way to 22.345 today to hint of real trouble.

I was tempted to not update my guidance for gold, since there is so little to say at the moment. When Monday's high failed by two ticks to surpass the previous Wednesday's high, it created some minor short-term negatives in an otherwise bullish picture.  We've got haphazardly dueling impulse legs on the lesser charts, suggesting more turgid action ahead, so let's simply stipulate that the futures must print 1159.00 (our old friend again, the "soft" peak from the hourly chart) before we rouse ourselves to action.

Yesterday's action was just dawdling until the final hour, when the weakest of impulse legs popped up on the lesser charts. This obliges us to carry at least a faintly bullish bias into the fray today, although we needn't ratchet up the enthusiasm unless 1187.00 is decisively exceeded intraday, or better yet on a closing basis. That's the midpoint resistance of the pattern shown, and if it gets roundly thrashed we should infer that buyers are intent on 1199.75, its 'D' sibling. _______ UPDATE (1:06 a.m. EDT):  The futures were getting manipulated lower early Wednesday morning, targeted on 1172.00, or perhaps 1167.25 if it's breached. That second number would make a dandy place to go bottom-fishing were it not precisely coincident with a key low recorded last Thursday.

“Helicopter Ben” Bernanke took such a drubbing in the Rick’s Picks forum yesterday that we thought we’d jump off the beaten path to offer a few uncharacteristic words in his defense.  As forum regular Gary Leibowitz noted, going after the guy is “a natural emotional response during times like this. The frustration level is at an extreme. Rationally, how can anyone blame Bernanke for doing his job? There will never ever be a single person in such an important role that would do otherwise,” wrote Leibowitz. “Not a one. Imagine if you were placed in his position and actually had total control in implementing any and everything you think up. What exactly would you do different? Allow all the banks and financial engines to fail? Yeah that might feel good for the moment but what would be the result?” In our heart of hearts, we’d have to agree. Had we been chosen as “Easy Al” Greenspan’s ill-fated successor, we’d probably have made all of the same mistakes that Mr. Bernanke has made – even knowing full well that they were mistakes. We’d have bailed out the banks by taking all that bad mortgage paper off their hands. We’d have done whatever it bloody well took to keep the assembly lines rolling in Detroit and Dearborn. And we’d have doled out hundreds of billions of dollars for road projects, transit systems, lab equipment and teachers’ salaries. After all, what’s the alternative? Only One Remedy From a purely economic standpoint, there is and always has been just one remedy for the very dire straits we are in:  Let the economy crash, let the banks fail; and let every state, county and municipality fend for itself, even if they have to go bankrupt to jettison pension obligations that are guaranteed to crush as