Friday, January 7, 2011

HUI's correction went impulsive on the daily chart yesterday with a breach of the external low at 530.01 recorded back in late November.  If the futures rally without going lower, the midpoint of the next leg down would represent a potentially excellent buying opportunity. However, if the Gold Bugs Index extends its losing streak with a breach today of the 525.00 low notched on November 16, that would be cause for concern.  From a structural standpoint, the index could fall to as low as 490.00 in search of support.  Alternatively, it would take an upthrust to at least 555.75 to return the lesser charts to bullish vigor.

Discernible weakness is starting to creep in, since it wouldn't have taken much to push the futures yesterday to our 1278.75 rally target.  The actual high was 1277.00, and the failure of bulls to get there was reason enough for me to warn traders off bottom-fishing during the weekly tutorial session. Night owls could attempt it at 1264.00 nonetheless.  That's the 'd' target of the pattern shown, and it seem likely to be reached because of the way its sibling midpoint, 1268.00, was brutalized. ______ UPDATE (11:07 a.m. ET):  Swooning eight points in mere seconds, the futures bottomed in the pre-dawn at 1264.50 -- two ticks from our target and perhaps close enough that some of you will have gotten long for the 10-point rally that followed.  Set a break-even stop for whatever remains of your position, since the low looks shaky as of this moment.

Silver's intraday charts provide a clearer rationale at the moment than Gold's for using Hidden Pivot targets.  They suggest that a fall to at least 28.345 is imminent; or to 27.295 if any lower.  A bottom at the first number would do moderate technical technical damage; however, if the second is reached it would lend strength to the bear trend by creating a dynamic impulse leg on intraday charts of larger degree.

Gurus have a bad habit of telling their subscribers exactly what they want to hear, so perhaps it's a good time to consider how ugly things could get if gold really falls apart. There's always that chance, right?  From a Hidden Pivot perspective, little technical damage has been done so far. However, looking at the intraday charts in a more conventional way, there's no denying the corrective pull of the 1331.00 low recorded in mid-November. That's where I think bulls will make their stand, and we can use it as a minimum downside target for now. Keep in mind that that would represent a correction of just 7% from December's all-time high. Note as well that when Gold was trading near those highs, none of us would have considered a correction of 10% to 15% anything special. If this one achieves the latter threshold, it would imply a low near  $1217; if the former (i.e., 10%), $1289. My gut feeling is that $1331 will contain the move,  but I'll be able to make a better guess once I've seen how the futures behave after they've created a bearish impulse leg on the daily chart.  As noted here earlier, that would require a breach of the 1352.00 low recorded in late November.  Alternatively, we should remain open to the possibility that the worst has already been seen. If so, the evidence would begin to accumulate with a 1389.50 print today, and it would double with a print at 1397.60.  Each of those numbers lies a tick above minor structural resistance on the hourly chart, although neither resistance, strictly speaking, qualifies as a look-to-the-left peak in that time frame.

(Cam Fitzgerald posted the following essay in the Rick’s Picks forum, but I am presenting it as a guest commentary because it discusses the all-too-real implications of America’s economic crisis so bluntly. Many of you, even the pessimists, will be troubled by this grim jeremiad, and some will disparage its conclusions. But four years into what has come to be known, probably euphemistically, as the Great Recession, it is time we asked ourselves whether a collapse indeed looms that could prove equal to what we have imagined in our most troubled moments. RA) On many levels, I have been in denial regarding the extent and severity of this downturn. Much of the hazard naturally revolves around the deflation of asset wealth – specifically, real estate. I only wish it was just money that was at risk. Collectively we seem poorly equipped to even contemplate the true consequences of the housing collapse. We are detached from its reality, mere spectators and pedestrians at the scene of an accident. “This” cannot really be happening -- not to us, anyway. And yet it is. And so we find ourselves in uncharted territory. We live in a disconnected time, without the benefit of eyewitness guidance from anyone who has experienced what we are now experiencing. There are several generations of people alive today with virtually no living connection to the traumas and realities of the past. What is occurring before our very eyes is simply impossible. And yet the trend continues, day after agonizing day. Will we awaken in time to recognize that we are all at the scene of the accident -- that we are actually casualties, not mere witnesses? It seems doubtful. But we had better snap out of our reverie soon. This is not our grandfather’s recession. For in fact, it