Friday, January 21, 2011

If bullion prices are about to collapse, then so is the price of crude.  Whatever the outcome, it will tell us whether China is indeed serious about putting a lid on the economy, since the country's demand for oil at the margin supposedly is what has kept prices so firm. The worst I could see over the next 3-4 weeks would be a plunge to late-November's lows near $81 -- a correction of about 12 percent from the New Year's high at 92.44.

The bearish pattern shown in the chart is sufficiently clear that DXY's interaction with the 77.47 midpoint pivot should tell us what the dollar is likely to do in the weeks ahead.  There should be a tradable bounce, and a precise one at that, but because it has taken the downtrend nearly five months to get there, any decisive breach of the support within the next few days, especially on a closing basis, would be akin to the groundhog seeing his shadow:  six more weeks of winter).

The drag on Silver seems heavier tonight than on Gold, but in any event it would take a pop to at least 27.940, exceeding minor peak recorded yesterday on the way down, to encourage.  Barring that, the 27.285 downside target given here earlier will continue to serve as a minimum downside objective.  If it's exceeded, there are two lesser patterns that could extend the decline to 27.215, or even to 26.860 if that last number is breached on a closing basis. The two targets can be located easily on the 5-minute chart, where A=27.935; or A=28.290.

Since I effused in today's commentary about how another leg down to at least 1322.40 is probably as kindly a correction as we're going to see, let me broach a more optimistic scenario in this tout. The five-minute chart illustrates clearly what must happen for bulls to be perceived as pushing back. In brief, the futures will need to pop today above the look-to-the-left peaklet at 1356.50.  Night owls looking for a camouflaged opportunity in advance of that should use the 1351.30 micro-peak for leverage.

Silver futures were breaking down late Thursday night and seemed likely to drag Gold down with them.  The 27.285 target given earlier for the March contract is a good place to look for a bottom, but as my tout makes clear, once that Hidden Pivot support gives way, the selling could accelerate toward capitulation.

This one-hour demonstration of the Hidden Pivot Method (recorded Wednesday) focuses on two promising stocks for 2011. One is copper miner currently trading near $1 that was brought to our attention by a friend, a Canadian analyst who told us about Western Silver before it tripled in price. The other is a company with a secure niche processing a mineral that is thought to be abundant but for which demand is about to explode beyond existing supplies.

They’re they go again!  No sooner had we finished praising the Wall Street Journal for their blunt assessment of the coming train wreck in municipal bonds than they do a hit-job on gold.    The article, which appeared in Thursday’s editions, would seem to have exhausted the inventory of clichés employed by establishmentarians these days to put the knock on the yellow stuff. Here’s their short list: Worries that China will “slam the brakes on its economy” Improving U.S. stats that diminish gold’s safe-haven status A too-strong rally in 2010 that has made “some” fund managers skeptical Stepped-up redemptions in SPDR Gold Shares A hike in margin requirements by the CME Markets that are “increasingly betting” against new Fed stimulus And if all that weren’t enough, the authors of this piece, Carolyn Cui and Liam Poleven, trotted out Dennis Gartman, the Darth Vader of the precious-metals world, to spout the kind of vague hyperbole that could sound even dumber a few months down the road, as so many of Gartman’s bearish pronouncements on bullion have over the years.  “Everywhere you went,” said Gartman, “everyone you knew was aggressive long [sic]. That’s a bad sign because it means everybody has already bought.” We might ask, have you bought gold yet?  How about your relatives? Friends? Neighbors? That’s what we thought.  It’s not exactly as ubiquitous as beer in the ‘fridge, is it? You can write Gartman c/o Kitco, to set the record straight. As for the bullet points listed above, even taken together they have about as much heft as a bullish economic forecast from the Fed chairman. For starters, although China’s slamming on the brakes could conceivably send the global economy into a fatal tailspin, that would only put more pressure on the Fed to monetize Treasury debt. Concerning the alleged improvement