Tuesday, February 15, 2011

After breaking a major trendline support yesterday, the futures have rallied back up to the 85.12 Hidden Pivot midpoint of a bearish pattern that projects to as low as 83.72 short-term. If and when that number is reached, you can bottom-fish with a stop-loss at 83.59 or, alternatively, look for a camouflaged turn from around 83.90 on down.

There are three peaks not far above, and if and when they are tested by a surge in buying, we'll know just how much guts this rally's got.  My hunch is that November's 81.44 high will endure for a long while, but we won't make any judgments until we've seen whether buyers can surpass one peak, or two, or perhaps all three without generating any b-c corrections on the daily chart.

A month ago, when the stock was shaken down hard on news that Steve Jobs was taking a leave of absence, I offered a very bullish target at 383.50 -- nearly 18% above the shakedown low.  This Hidden Pivot objective remains valid, although you should be alert to a possible stall at 376.84, a lesser resistance.  Both numbers are clear and compelling on the 480-minute chart reproduced alongside. We'll look to get short at the lower target, so stay tuned.

The futures remain well on track for a pop above the 30.885 peak flagged here yesterday, but it's time to return our focus to a more ambitious target at 32.525 that was broached here earlier (adjusted upward by 0.005). Two things make this a high-odds bet: 1) the ease with which bulls blew past not only the 29.415 midpoint, but also some peaks made in the first half of January; and 2) the failure of last week's retracement to return to the midpoint to test support.

No change. A Hidden Pivot at 1379.80 has been our minimum upside target for so long that it should no longer be regarded as especially significant. The short-term trend is bullish but growing stale, and we should therefore require nothing less than a pop by Wednesday or so to 1394.80, eclipsing two external peaks on the hourly chart, before we get too enthused.  In the meantime, a close above the 1362.00 midpoint associated with the target would be an encouraging start.

Since there are some potentially important rally targets in sight, I'm planning to open a virtual trading room about 20 minutes before the NYSE opens on Tuesday.  This real-time guidance is for Rick's Picks subscribers only, and details that will allow you to access the session will be provided in the chat room around 9:05 a.m. EST.

Besides a major Hidden Pivot at 1356.00, there are two rally targets immediately above that come from lesser patterns.  They lie respectively at 1332.75 and 1339.25.  You can short the first with a stop-loss as tight as 1333.25; and the second, stop 1340.25. We are risking relative nickels and dimes so that if the futures don't quite make it to 1356.00, we'll have a horse in the race.

[In a guest commentary here yesterday, our friend Erich Simon used grocery prices from the good old days to buttress his conclusion that $2100 was the “right” price for an ounce of gold. The essay provoked a lively discussion, including the interesting note below from “Radek,” who’d rather own bullion shares than the actual metal. To find out why, read on.  RA] I think $2100 gold will just be a point in time when we can officially call the beginning of a “gold bubble” – i.e., where perceived value is greater than fundamental value. It will only go up from there for a few years (more or less), ahead of the pace of inflation while the herd gets in. It will go parabolic to heights that [another who posted to this forum] suggested. Then it will pop, and settle down, probably back to the $2100 that Mr. Simon suggested, and rise continuously at a more “steady” rate thereafter.  This is why I have decided not to purchase any bullion of any kind. Instead I am going to take advantage of the leverage that quality gold/silver stocks offer during the run-up; hopefully, sell at or near the top; wait a year; and then let everything crash and “settle down.” This will allow me to purchase more bullion due to the additional gains from leverage (as long as fees and taxes don’t make it financially unsound, as ‘Ricecake’ noted [above] ). Why would anyone in their right mind want to purchase bullion (never mind the losses due to fees, premiums, insurance, and potential future government interventions) unless they believe the “end game” is a total and utter collapse of the financial system that forces us to revert to local bartering with said bullion? I see bullion ownership as an “all or nothing”