Friday, November 12, 2010

Gold appears to be headed down to a Hidden Pivot at 1375.5, if not lower.  On Thursday gold bounced precisely off of the midpoint of a pattern that had been identified beforehand in the chat room and in the morning webinar.  The subsequent rally peaked more than thirteen dollars higher, but a sharp twenty-seven-dollar selloff followed.  The pattern's "D" target of 1375.5 is now our minimum downside objective.  Traders buying the target should put stops just below 1375.0.  If Wednesday's low of 1382.2 is not touched or surpassed - and it has thus far survived two vigorous assaults - then a pair of upside targets including 1431.6 will remain active.  (Posted by Doug McLagan) _______ UPDATE (Saturday, November 13):  "If not lower" turned out to be the key phrase of this tout.  The futures bounced from 1377.3, missing our target, and after a seventeen-dollar rally they went into a steep thirty-five-dollar dive, slicing through the target and cancelling the bullish pattern referenced in the tout.

While I've accentuated the negative in bullion and the E-Mini S&Ps, eschewing Mr. In-Between,  I've also left room for a not-exactly-implausible rally.  This is warranted because of the way the market shrugged off Cisco blues yesterday.

Silver and the E-Mini S&Ps look to be chained to each other, like Tony Curtis and Sidney Poitier in The Defiant Ones.  They both showed the same reluctance yesterday to fall to a Hidden Pivot target so obvious you can practically feel its magnetic pull when you look at the chart. (See for yourself, inset).  The 25.250 target remains valid nonetheless and can be bottom-fished with the tightest stop-loss, since the 26.715 midpoint has already been trashed.  Alternatively, bulls would be back in charge, at least for the near term, following a print at 28.200.  In fact, a close above that number would put a 29.880 rally target in play.

The futures wasted an entire day failing to fall to an in-our-face Hidden Pivot support at 1194.00. The target remains valid nonetheless, and you can plan once again on bottom-fishing with an 1194.25 bid, stop 1193.50.  I don't intend for you to take this position home over the weekend, so don't initiate the trade so late in the day that you might have trouble exiting by the close.  Since the market's resilience yesterday came on a day when bad news from Cisco should have caused stocks to get schmeissed, there is always that chance they'll go higher today.  This would be a non-event, however, until such time as 1219.75 is reached, since that's where a bullish impulse leg would be created on the 15-minute chart. _______ UPDATE (8:58 a.m. ET):  I blew a nice trade by not following my own rule, which says:  Put the stop-loss below the next whole number -- in this case, 1193.00.  The implied 1192.75 stop-loss -- rather than the showboatingly tight 1193.50 that I advised -- would have caught the subsequent 13-point rally and provided an effortless ride to a gain of as much as $650 per contract.

It's quite a challenge for me to keep from trash-talking the dollar, since I admittedly lack the imagination to find an even remotely plausible reason for it to rally -- other than a purely technical one. Be that as it may, yesterday's logic-challenged thrust surpassed the first of three peaks on the daily chart that will need to be dispatched to clear the way for an intermediate-term rally of perhaps 3-4 weeks.  Accomplishing this would require a mere puddle jump to 78.70, just 0.41 points above yesterday's 78.29 high. This modest feat seems a foregone conclusion at this point but we'll hold the one-handed applause until such time as it actually happens.

William Greider, writing in The Nation, sees a global economy on the brink of a potentially catastrophic trade war. "We have reached the endpoint of globalization as we have known it," writes Greider.  "It cannot continue as before, because the United States is essentially tapped out. Goliath has fallen and cannot get up. Who will lend a hand? Not China, obviously, but also not Japan and the Asian Tigers, or the European nations." Because Greider has tailored his article for a far-left publication, it glosses over the fact that America's standard of living would have to take a huge hit before we could even hope to compete with Asian manufacturers. Union wages in the manufacturing sector in particular would have to fall by perhaps half, with commensurate cuts in health care and pension benefits.  Of course, much higher levels of capital investment could make us competitive over time. However, drastic changes in this area are inconceivable, since Americans are 50 years removed from knowing how to save and invest. Had we done so with the zeal of Asians, we'd have state-of-the-art factories today that could overcome Asia's wage advantage while leveraging the much lower shipping costs associated with serving a domestic market. Click here for the complete article.

(Today’s commentary, on the pernicious influence of the mainstream media, is from Wayne Razzi --  aka “Red Will” in the Rick’s Picks forum. We only think we are changing this world for the better when we throw the rascals out on election day, says Wayne.  In reality…well, there may be no reality for those who see the world through the eyes of TV news, pop magazines and newspapers.  If we are to escape from the illusion that has imprisoned us like a maze, says Wayne, we’re going to simply have to free our minds from the illusion itself and walk away from it.  RA) *** Before the season of the witch recedes from memory, let’s have a little fun. You’re having a dream.  You dream that you’re a family man who’s awakened on the Saturday morning before Halloween.  You find yourself at the breakfast table and it isn’t long before your wife, whispering to you of course so as to not tip off the kids, suggests that you fit some “agri-tainment” into your plans.  You immediately take to the idea with visions of your wife suddenly bearing a strong resemblance to one of the gals from Petticoat Junction.  Your wife, knowing you only too well, quickly reminds you that what she actually meant was for you to take the family to the local farm for some pumpkin-picking, hay rides and of course some time spent in the Corn Maze.  The visions of Billie Jo, Bobbie Jo and Ellie May, while we’re on the genre, all quickly dissipate. Now you’re at the farm having a good old time.  You save the best for last and thus you all enter the corn maze in the afternoon.  It’s much larger and more sophisticated in its design than you expected and it’s not simply