Tuesday, November 16, 2010

The focus remains on a 25.250 correction target first broached here a while back, and it can be bottom-fished with a stop-loss as tight as three ticks. (Please note: The slightly-wider-than-usual stop-loss is intended to encompass an alternative target at 25.240.)  Silver needn't have done anything particularly impressive yesterday to overcome the drag of this correction, but it failed by two ticks nonetheless, adding weight to the downside target. SIZ will have another chance to turn things around, though -- with a push above the benchmark given here yesterday, a structural peak at 26.480. _______ UPDATE (10:49 a.m. ET): The forecast got the magnitude of this sell-off right, at least thus far, but the so-far low at 25.220 overshot our target by three cents, stopping out longs tied to a 1.5-cent stop-loss.  Now, we should use a Hidden Pivot support at 24.855 as a minimum downside objective. (60m chart, A=27.300 on 11/12; B=25.700 and C=26.455). 

The mildly compelling Hidden Pivot target at 1338.10 shown in the chart implies that lower prices are coming, especially since its sibling midpoint support at 1357.30 evinced little discernible support. The target can be bottom-fished with a stop-loss as tight as 1337.40, but if it's hit expect the key structural support at 1325.50 to turn magnetic. _______ UPDATE (11:42 a.m. ET):  The futures have traded as low as 1332.00 so far today -- down more than $36 at that point -- stopping out our bottom-fishing foray quickly and, one hopes, relatively painlessly.

The Hidden Pivot support at 1184.75 where I'd suggested bottom-fishing yesterday is still valid, so let's try again using the same 1.00-point stop-loss that was originally advised.  You could try once more at 1177.25, stop 1176.50, if the trade fails, since that's where the futures will likely be seeking another opportunity to bottom. _______ UPDATE (10:10 a.m.ET):  This one hit a dead-center bullseye.  The futures came down to exactly 1184.75 on the opening, then rallied 4.25 points to 1190.00.  Since we used a three-tick stop-loss initially, partial profit-taking and/or the implementation of a can't-lose trailing stop was implied at 1187.00, nine ticks above the entry. The futures subsequently made a secondary low at 1184.50, but because the move down created no new impulse legs of even minor degree, you could still be holding some contracts at your discretion.

A decline to a Hidden Pivot support at 83.58 over the next couple of days should be viewed as an opportunity to bottom-fish with a stop-loss as tight as 10 cents. Camouflage aficionados should look to get short ahead of the decline if the futures rally to 84.67, the c-d midpoint of the pattern associated with our bottoming target. _______ UPDATE (9:43 a.m. ET):  Both the short and the long would have worked beautifully, since the futures topped at 84.74 -- 7 cents from the midpoint support I'd flagged -- before heading into the tank.  Along the way, they took a 41-cent bounce off an interim low at 83.56 that lay just two ticks beneath the hidden support I'd flagged.  Now, like just about everything else that is traded on some exchange, they are falling anew -- bound, presumably, for an 82.47 HP support.  It too can be bottom-fished with an insanely tight stop-loss if yolu please.

With yesterday's seemingly tireless rally, the Dollar Index pushed past a third prior peak on the daily chart without having paused for breath.  This created an ostensibly bullish impulse leg; however, for the time being I will treat it as a trap rather than as technical evidence that pigs can fly.  From here it will take a stiff pullback to terminate the impulse leg, given the dramatic length of the k-A segment.  In any event, we'll move to the sidelines, whence we can judge the dollar's prospects with cool detachment.

Time for a reality check in bullion – and in the dollar while we’re at it – since anxiety about the price action in both seems to be rampant these days. The latter, as represented by the NYBOT Dollar Index, exceeded a bullish trigger price of ours yesterday by 0.02 points, causing some gnashing of teeth in the Rick’s Picks chat room. Gold and silver investments are quite popular in this forum, to put it mildly, and signs of strength in the dollar, however faint, are usually seen as threatening.  Before we get upset about the prospect of a resurgent greenback, however, let’s consider why it has been rallying in the first place.  Quite obviously, this has been a response to rumblings in Europe, where Ireland and Portugal have recently re-emerged as the financial basket-cases-of-the-month. We’ve seen this movie before, though, and that’s probably why the U.S. dollar’s upward adjustment has been relatively muted this time around. There are other reasons as well. For even in a financial world that has been steeping for way too long in an economically fatal brew of delusion, stupidity and moral blindness, and in which, each day, cosmic quantities of Other People’s Money (OPM) are deployed in sham markets with wanton recklessness, the flight-to-safety story was becoming a difficult sell. Some of you may recall that the word “safety” was once used interchangeably with “quality,” as in “flight-to-quality,” when referring to the sandpiper-like shifting of global liquidity into dollar assets, most significantly Treasurys, in times of crisis. Nowadays, however, the word “quality” is rarely used in connection with the dollar because it would be an affront even to the village idiot’s intelligence – to Tim Geithner’s intelligence, for all we know. Those PIIGS Again… Not that such considerations would altogether discourage the OPM crowd from