Friday, November 5, 2010

I've avoided effusing over the weekly chart because it projects to 30.005 and I didn't want to get everyone stirred up about it, at least not before today.  Now is a good time to stretch our bullish imaginations, the moreso because real bulls take $50 Silver, eventually, as an article of faith -- and what can it hurt to view $30 as being in-the-bag? I'll add the target to our matrix of possibilities. Keep in mind, however, that the futures will need to get past a midpoint resistance at 26.425 to make the higher target a high-confidence number.  That's just 5.5 cents above yesterdays high, and it deserves to be watched closely.  If the futures blow past it effortlessly today, we can be confident that 30.005 will be reached.

A feisty charge after-hours has lifted the futures above the ostensibly daunting peak at 1388 recorded on October 14.  In all of human history, that was the highest price for which an ounce of gold had ever traded.  And so we must infer that the good guys were feeling pretty confident when they decided to take on a millennial peak at a time of day when most U.S. traders were headed to dinner.  The move so far has reached 1394.40, and although that's 12 bucks below the 1406.70 target we've been using as a minimum upside objective, it seems a foregone conclusion that buyers will put the finishing stroke on the rally before trading opens in New York Friday morning. I've extrapolated yet one more target from the pattern -- 1427.50, and it looks sufficiently compelling on the hourly chart (see inset) to use as a new minimum for the bull cycle begun on September 28.  Please note with traderly caution, however, that 1400 may prove to be other than a piece of cake.  For one, it represents an important round-number resistance; and for two, 1400.80 is the D target of the following pattern on the weekly chart: A=882.30 (4/17/09); B=1234.90 (12/04/09); and C=1048.20.

Let's not make this romp to Dow 35000 too terribly easy for the bulls and their evil masters on Wall Street. Note in the weekly chart that although yesterday's rally spirited the Dow into solidly impulsive territory, there remains an unconquered peak-along-the-wall going back to August '09 that implicitly challenges the herd's daring.  It lies at 11867, and we should stipulate that the Indoos must exceed it before we cast our lot somewhat wholeheartedly with imbeciles, the foolhardy and, ultimately, with wild-eyed speculators.  We should also require that the rally be unpaused (i.e., no 'a-b' pullbacks along the way) on the weekly chart until it gets past our benchmark. For now, though, no discrete portion of the endless stretch of rally from the March '09 low can be treated as an impulse leg, since none of the three visually evident segments surpassed the required two prior peaks. In fact, the only impulse leg we have to work with to project higher prices is the uncompleted one begun from  9937 on August 27.  Since it has yet to terminate, we cannot say much about how high this suicidal climb will go.  But as noted above, it would significantly increase the implied power of the move if the Dow were to keep chugging higher, surpassing 11867 with nary a b-c pullback along the way.  Take a look at the chart, since it greatly simplifies what I've said above.

(Wow!  Are we getting rich already, or what!? Yesterday's 219-point rally in the Dow was a windfall downpayment on the "wealth effect" that Ben Bernanke's latest gift to all humanity is supposedly going to create. For our part, we're doing our patriotic best to spend every dime of our anticipated share of QEII, pulling our sons out of the horrid public school system and enrolling them at Le Rosey. We've also put a good-sized chunk of change down on a candy-apple red Veyron,  although it set us back an extra $75k to bump a few Hollywood types down the waiting list.  Because the commentary below attracted a slew of great responses in the forum – see, for one, Roger Erickson’s post on how QEII does not actually create money -- we're running it for a second consecutive day.  To those of you who are taking the Hidden Pivot Webinar, see you tonight in class...  RA) The Dow finished up a measly 26 points the other day on word of that the Fed plans to "buy" $800B of Treasury debt over the next eight months. The news caused pundits round-the-world to breathe a nervous sigh of relief.  The turgid action in stocks was taken to mean that there were no surprises for investors: not in Tuesday's election results, which saw Republicans take solid control of the House of Representatives, though not the Senate; not in President Obama’s subsequent press conference, which appeared to have cracked the door open ever-so-slightly for compromise on Obamacare and cap-and-trade; and not in the announcement itself that the Fed is about to rev up the money supply at a prodigious rate.  Could it possibly get any better than that? We ask the question facetiously, since anything one might find to like about the day’s major news events could be spun negatively. We’ll concede nonetheless that the Republican landslide in the House is probably