Wednesday, January 5, 2011

Let's require a close above 1261.00 on the weekly chart before we infer that much higher highs may lie in store for the S&Ps. That's a Hidden Pivot midpoint, and it's tied to a 'D' target at 1356.00. The Dow would be trading around 12400 if the latter number is reached -- hardly a stretch in these crazy times. The move would be extraordinary if it occurs straightaway, but keep in mind that the A-B impulse leg that will have preceded it was itself extraordinary, climbing for ten weeks with barely a pause.

Autumn's feverish momentum has been broken, but take a good look at the weekly chart if you think that something exceptional happened yesterday. Sure, Comex Silver closed $1.61 lower on the day. But that wasn't enough,  even, to bring the futures down to the trendline we've been watching for the last several weeks.   It will come in around 29.095 today, and so we'll use that number as a minimum downside target.  Because a bounce from somewhere near the support seems likely, it will make an excellent reference point for anyone inclined to bottom-fish using camouflage.

We'll worry about this correction if and when it starts to pound on prior lows on the daily chart. So far, however, and as I've noted in today's commentary, technical damage at the level of the daily chart is not minimal, but non-existent.  The hourly chart is another matter, although I would still be inclined to gamble on a tradable bottom by using such a pattern as I've sketched out hypothetically in the chart.  The 1352.00 downside threshold noted in today's commentary should be used as a bearish tripwire, since its breach could signal a wallow sideways for as long as 3-4 weeks.

So accustomed have we become to seeing bullion’s worst days matched lurch-for-lurch by the stock market’s that yesterday’s chastening of gold and silver bulls, if no one else, came as a rude surprise. Up until now, the exhilarating pleasure of watching the stock market get the crap kicked out of it whenever gold and silver were falling was our consolation prize.  Yesterday, however, with gold down nearly $50 at one point and trading $42 lower at settlement, the Dow thumbed its nose at bullion bulls by rising a token 20 points. Ouch! If the Industrial Average instead of rising had fallen as hard as gold percentage-wise, it would have been down by 345 points. And what a lovely day that would have been!  It is so rarely any more that we experience anything resembling a breath of sanity on Wall Street that the spectacle of stocks paying heed, however fleetingly, to America’s darkening economic prospects comes (when it does come) like a bracing blast of fresh air -- akin to being pronounced fit as a fiddle by one’s shrink. Alas, with yesterday’s schizophrenic tallies to ponder, we can only infer that our view of the financial world, particularly of a U.S. economy sinking deeper and deeper into Depression, remains outside the flow of popular opinion. So what of the pasting that bullion took yesterday?  We wouldn’t worry too much about it, at least not yet.  Although Comex February Gold fell $50 to an intraday low of $1375, it would need to drop by a further $58, to $1317, over the next day or two to do any real technical damage to the daily chart (see above). As it happens, the selloff did not breach even a single prior low; we require no fewer than two such breaches to signal the