The 1182.25 pivot we were using repelled yesterday’s rally as expected, but the anemic 7.50-point correction that has ensued thus far will have given bears little to cheer about. If the pivot is exceeded this morning as seems likely, that would mean a target that took eight days to achieve held back the tide for all of about 18 hours. It would also leave us scrounging for a new target — presumably on the daily chart, since possibilities on lesser charts have already exceeded the limits of clarity. (There is just one more such target, however — 1192.00 — but I am not recommending that you try to short it.) Working the daily chart for all it’s worth generates a matrix with two targets worth shorting: 1195.25 and 1198.75. Neither will yield the kind of odds that would warrant hocking the family jewels, but if I had to pick one, I’d go with 1195.25, stop 1196.25. These are all scalp-shorts, of course, since last April’s imposing peak at 1208.00 will have become magnetic by the time the futures get within a few points of 1200. _______ UPDATE (11:57 a.m. EDT): The 1182.25 pivot continues to hold, and a second-day confrontation with buyers this morning has sent them scurrying tail-between-legs to a so-far low at 1167.25. The move is impulsive on the hourly chart, so there’s a chance recent highs could stand for at least a few days.
From the monthly archives:
October 2010
December Gold has been up as much as $9.30 so far tonight, putting it within $1.90 of the target we’ve been using at 1381.70. This has been our minimum price objective since the futures were trading $50 lower, but if the Hidden Pivot resistance gives way easily and the futures poke $2 (or so) above it, look for a finishing stroke over the near term to at least 1400.80. That’s the next bullish Hidden Pivot in a sequence derived from the weekly chart. Each of the pivots is capable of showing tradable stopping power, but scalpers should not risk more than 40 to 60 cents trying to impede this freight train. Profit-taking on long positions is another matter, but an option hedge is suggested at the least. If it’s covered just above 1381.70, you will likely have given up only a couple of bucks of the $21 that would remain to 1400.80. _______ UPDATE (8:21 a.m. EDT): Gold has been as high as 1388.10 overnight, so it’s probably time to consider the next target in the sequence: 1415.40. This one comes from the daily chart where A=21.060 on September 28, but as you can see, it is not a true low because it has no high preceding it. I have put this concern aside, however, since the low itself is so visually distinctive, and we’ll raise our minimum objective over the near term to 1415.40 with the usual caveats. For starters, the 30-minute chart (though not the hourly) would turn bearish with a print today at 1368.75.
It’s shortly before 10 p.m. EDT, and the futures have exceeded by a penny the 24.315 target we were using as a minimum upside objective for the near term. The overshoot is not yet sufficient for us to consider the hidden resistance spent, but if buyers should push a bit higher — say, to 24.340 — we should infer they’re capable of reaching 24.820, the next Hidden Pivot in the bullish sequence. The implied 50-cent upthrust would be tradable in theory, but it will require a “camo” expert to get on board at just the right time. Please note as well that on the hourly chart, it would take a print down at 23.270 today to suggest that bulls may be exhausted. (Note: To view the price pattern associated with today’s target, call up yesterday’s tout, click on the chart, and visually lower the point ‘A’ by one click.) _____ UPDATE (8:29 a.m. EDT): Buyers shredded the 24.820 target overnight, reaching a so-far high of 24.950. Because this occurred with a fleeting spike in the middle of the night that gave way to a 68-cent (!) pullback, we should consider ourselves warned: short-squeeze dynamics obtain, and the action is apt to grow wilder than anything we’ve seen in a generation. For your information, the next compelling, Hidden Pivot rally target lies at 25.365.
It’s shortly after 9 p.m. in New York, and the last of the trapped Chilean miners – Luis Alberto Urzua – has just emerged from the half-mile-deep hole that nearly became a tomb for him and 32 co-workers. Every ten minutes or so, the rescue capsule has surfaced, the crowd has broken into jubilant cheers and song, and a billion TV viewers around the world have greeted yet another survivor of a 69-day vigil that had elicited the prayers of the world. This scene was repeated 33 times, and yet it never grew old. We wouldn’t mind seeing the capsule go up and down, and survivors emerge each time, in a loop that ran for a week. It’s been a long time since truly good news – great news! – dominated the airwaves.
For each miner, there is a story to tell, and we will be hearing those stories in the weeks and months ahead. One emerged from the capsule a great-grandfather for the fourth time, while another found the welcoming embrace of his pregnant wife. Yet another who had arranged to have his mistress on hand found that his wife was not. A Chilean flag hung in front of the rescue shaft, a curtain to obscure video coverage if something went wrong. But nothing did. A 30-second delay for TV coverage was planned but never implemented. “The rescue operation was so marvelous that there was no reason not to allow the eyes of the world” to see it, Chilean President Sebastian Pinera told a Fox network reporter.
Savor the News
The world should salute the rescuers and savor the news. Never before has a human being survived after being trapped underground for so long. For the first 17 days the miners were buried, no one even thought they were alive. And yet, they all appeared healthier than we might have expected, and some were even freshly shaven. The miners hung together, buttressing each other against fear and panic, against despair, and, finally, against the terrifying encroachment of death. Their survival will endure as testimony to the indomitable spirit of humankind.
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A rally target at 576.19 that was first broached here nearly a month ago (with HUI trading around 500) is now in play, since a lesser target at 529 has been decisively exceeded. A secondary target at 558.55 is also beckoning, and so we’ll make it our minimum upside projection for the near term. If t should be exceeded on a closing basis for two consecutive days, the higher target would become an odds-on bet. Both targets come from the weekly chart (see inset).
We stumbled onto a possible opportunity yesterday when someone asked about Wheat during the weekly tutorial session. Notice in the accompanying chart that the recent high at 739.75 lies just 2.75 cents (per bushel) below an entry trigger on the monthly chart at 742.50. If and when the long trade is signaled, I would suggest finding a small abc to make entry with a commensurately small stop-loss. (The alternative, placing a stop beneath the 643.50 point ‘C’ of the larger pattern would risk a whopping 99 cents per contract.) I’ve set a screen alert myself and will update with a bulletin in the chat room if this gambit materializes. _______ UPDATE (October 18): Before wheat bores us to death with its by-now protacted pullback, we’ll remove it from the front page. The 742.50 entry trigger will remain valid nonetheless until such time as 643.50 has been exceeded to the downside.
Someone in the chat room yesterday seemed to despair of the possibility that Minefinders Corp. would ever reach targets at $15 and $21 proffered by another guru. From a Hidden Pivot perspective, both of those targets are out of range for now, and there is no stretching the evidence to suggest otherwise. The picture would brighten, however, if MFN eventually succeeds at something it conspicuously failed to do last November and again in January — i.e., surpass the 12.14 high recorded on the way down in July 2008. The good news is that the weekly chart is currently building on a bullish impulse leg with the potential to get MFN to as high as 11.89 over the next 6-10 weeks.
Cameco, a uranium play, has a chance to emerge from three years of purgatory if it can convert the nascent impulse leg shown in the chart into an abcd pattern that eventually reaches its target. The impulse leg is promising already, having exceeded the requisite internal and external peaks on the weekly chart as well as a 29.98 target. It needn’t even add a third peak — last January’s 33.74 — to prove itself. I’ve sets screen alerts significantly above and below current levels and will update guidance if either is hit.
A 40% rally in the Dow by year’s end? This seemingly farfetched scenario is laid out in an article at Kitco that uses an overlay of the Nikkei Index to make its case. Take a look and see what you think. Here’s the link:
http://www.kitco.com/ind/Wilson/sep012009.html
I received the link myself from a longtime subscriber and replied –skeptically –as follows:
“It’s always fun to speculate, Phil, but truth to tell, I haven’t seen a chart-overlay fantasy play out in all the years chart-watchers have been sending them to me. Not even once.
“I have particular trouble buying this set-up, however, because, for starters, I am bearish on the USD. Also, Japan’s economy was in far better shape in 1998, even mired in deflation, than the U.S economy is today. They also had something to counteract deflation that we do not: an insatiable U.S. consumer who made Japan’s export-heavy economy hum. Still, I guess anything’s possible, and if Fibonacci numbers are destiny, then the envisioned rally certainly could happen as depicted, with extreme monetary easing substituting for whatever factors pushed the Nikkei into a last-gasp, Wave IV rally.”
Gold and Stocks Can’t Dance Together Forever
by Rick Ackerman on October 15, 2010 2:34 am GMT · 23 comments
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 with it? The answer is no, but only because we think stocks will ultimately be undone by a collapsing dollar. That’s not exactly a black-swan event, since nothing could be more predictable than the collapse of a currency that is already fundamentally worthless. But we strongly doubt that shares and gold would decouple sufficiently to simultaneously produce the extreme valuations predicted, respectively, by stock-market bears and gold bulls. To be more specific, although we think it’s at least possible that the Dow could eventually fall below 1000 as Bob Prechter has famously predicted, it seems inconceivable that an ounce of gold would be trading at that time for $5000 or more, as some well-known gurus have forecast. More likely, in our view, is that, come hell or high water, bullion will perform very well relatively to virtually every other class of investible asset.
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