October 2010

Auerbach & Grayson's latest report amplifies the theme of today's commentary, admonishing us to remain bearish on the dollar even though every contrarian bone in our bodies may be telling us to do otherwise.  Click here  for the full report.

We hold 800 shares with an adjusted cost basis of 13.07.  There are two Hidden Pivot targets just above -- at 28.61, 22 cents beyond yesterday's high; and at 29.00.  As a hedge, I'll recommend buying four November 29 puts for around 1.05 if SLW gets within a nickel of the higher pivot. I may update guidance, so check back intraday.

Nervousness about a possible upturn in the dollar has begun to permeate the chat room, so today's Dollar Index tout is quite detailed. For the foreseeable future, I will continue to track DXY very closely, since the dollar is indeed the most important element of the big picture. My gut feeling is that the flight-to-safety story is sounding stupider by the week and may already have become obsolete.

Prospects for the dollar have become an obsessive concern in the chat room -- and rightly so, since even a hint of strength is going to bring gold and silver prices down hard. For that reason, I will be tracking DXY's oscillations very closely in the days and weeks ahead.  So far, however, as the dollar has continued to fall, I've seen nary a flicker of life.  Promising impulse legs have fizzled like soggy firecrackers, and downtrending ABCs have consistently exceeded their 'D' targets.  To me, this spells a continuation of the dominant trend. Nor am I persuaded by the arguments of some well-regarded chartists who have been calling for a turn. Their bullishness seems to be based on little more than the fact that the dollar has been sold down so hard, and for so long, that, well, it is simply due for a rally.  My response is that it is equally plausible the dollar has finally slipped into the vortex that will take it through all previous supports to scary new lows.  We shall see, but in the meantime let's keep an open mind. Most immediately, we'll set a benchmark for today at 77.41.  A rally touching that price will have exceeded two external peaks on the 30-minute chart, one of them a look-to-the-lefter "along the wall" of a steeply declining price bar. A minor pattern (also shown) is already in progress, but it projects no higher than 76.98 if the 76.65 point 'C' remains intact. ______ UPDATE (12:45 p.m. EDT):  No surprises.  DXY has topped so far today at...76.97.  Click here  to access Auerbach and Grayson's latest report, which for purely technical reasons is as bearish on the dollar as I am.

As of mid-evening Thursday, the futures had recouped most of the ground they lost after sellers swarmed a steep, pre-dawn rally.  The high of that spike was at 24.950; so far, the recovery has rallied to within a dime of it, gaining 15 cents off the intraday low. My minimum upside target for the near term remains 25.365, but a pullback today exceeding 23.995 would temporarily kill the momentum by creating a bearish impulse leg on the hourly chart.  The look-to-the-left low that makes this so is highlighted in the accompanying chart.

The $17 selloff that followed yesterday's pre-dawn spike did nothing to disturb a 1415.40 rally target given here earlier. Notice in the accompanying chart how the low of the pullback came within an inch of touching a Hidden Pivot midpoint at 1370.50. That number was resistance when the futures broke through it a day earlier, but it is now acting as support.  Shortly after 9 p.m. EDT Thursday, the December contract appeared reluctant to unleash another thrust and had stalled at a level equal to a 1383.90 peak recorded intraday.  It's too early to say whether this portends sluggishness on Friday, but it does suggest that buyers are not feeling as feisty as they were the night before.  A day of backing and filling might be just what this rally needs.

For a second straight day, the futures pounded on a Hidden Pivot rally target at 1182.25 without getting past it.  Since the target was eight days in the making, a three-day consolidation would be about right. Accordingly, we should look for perhaps one more day in the woods before buyers emerge victorious yet again. Night owls can try bottom-fishing at 1168.25, a midpoint support shown in the accompanying chart. A three-tick stop-loss is about as much as I would risk, but if it's triggered, the futures would be signaling more downside over the near term to as low as 1160.00.

October 13, 2010: Creating a Matrix from Rick Ackerman on Vimeo. Come to your desk each morning armed with a “matrix” of Hidden Pivots, and not only will you never be caught off guard by that swoon in Gold that we all know is coming someday, you will also have a schematic of price levels to see you through a successful trading day. We discuss the matrix – essentially, a table that shows permutations of Hidden Pivot midpoints and ‘D’ targets drawn from various time frames – during this session. Finally, we identify some possible trades for later in the day in Gold, Silver and the E-Mini S&Ps.

Stocks and bullion are moving so closely in-step these days that gold bugs may soon find themselves in the uncomfortable position of rooting for higher share prices. For many of them this will be quite a stretch, since gold and silver are popular now mainly because they’re regarded as hedges against the kind of economic disaster that would sink the stock market. To be sure, there are some who see the concurrent strength of shares and bullion as stemming from the same source – namely, inflationary pressures.  The argument is solid and there is no way to refute it, since no one can say exactly why shares are rising.  Whatever the reason, bullion’s ascent is easier to understand:  It is occurring simply because the central banks have been inflating their respective currencies to the point of valuelessness. But while this ever-accelerating process of debasement has the potential to drive precious-metal prices into the ozone, it seems unlikely that share prices would benefit from such a scenario, implying as it does a looming catastrophe for the global economy. What this suggests is that although bullion quotes could conceivably be goosed to the moon if the world’s currency system were to collapse, shares prices could be driven only so high by panic. For in the final analysis, corporate stocks are tethered to the real world of earnings multiples, cash flow, inventory and depreciation in a way that gold and silver are not. And while the imagination can run wild with gold and silver valuations in a world presumed to have lost all trust in paper money, the future value of, say, IBM’s service contracts is going to be limited ultimately by more mundane concerns. Extreme Predictions So, if the stock market were to plummet, do we expect gold and silver prices fall