Monday, February 28, 2011

Moments ago, March Silver took a small but encouraging leap to 33.570 that suggests it is eager to lead a recalcitrant Gold higher.  As of 10:37 p.m., the move is very subtly impulsive, having exceed by two ticks a minor but potentially useful (to camouflageurs) peak recorded on the way down last Thursday.

Rally patterns in all time frames are bullishly aligned and point on the weekly chart to at least 37.00 (A=17.455 on July 30, 2010).  More immediately, Sunday night's buying action appears less than exciting, although it is still leaving hand holds for camouflage buying on charts of 10-minute degree or less.

Sunday night's first, probing thrust has fallen shy of a seconday peak at 1416.50, hinting that bulls are lacking in gumption as the new week begins. In any event, structural resistance at 1426.30 still looms as the most important challenge for buyers over the near term.  Night owls and camouflageurs may have a chance to leverage a bullish change of heart if the futures pop faintly above 1416.50 (see inset) and pull back into a b-c correction.

A rally target at 1.4046 remains valid, but with the futures grinding lower it has little practical value at the moment. An unpaused upthrust exceeding the two numbered peaks, the higher of which lies at 1.3793,  would put bulls in charge again.  Please note that there's a minor Hidden Pivot resistance at 1.3778 above which -- on a closing basis -- the futures would become an odds-on bet to reach a minimum 1.3846.

A rally target at 57.96 remains valid, so we'll look to short it by buying four March 57 puts. You can determine their fair price by monitoring the bid/asked spread as the QQQs closely approach the target.  A stop-loss at 58.12 is still advised. ______ UPDATE (9:36 a.m. EST): We bought the puts for 0.62.  Stick to the 58.12 stop-loss for now.  ________ FURTHER UPDATE (2:05 p.m. EST): Sell for 0.80 or better two of the four puts acquired earlier this morning for 0.62.  We'll carry the two that remain using 0.44 as our new cost basis.

Although sellers were their usual, timid selves on Friday, the action was bearish from a Hidden Pivot standpoint nonetheless because all of it took place beneath some not-very-challenging peaks recorded two days earlier.  Mild price weakness has emerged Sunday night, but so far, with the futures off just five points, it seems more like the kind of selling that bulls engineer for their benefit rather than fearful selling. In any event, the nearest target at our disposal for a minimum downside objective is 1292.00, the midpoint support shown in the accompanying chart. A decisive penetration of that number would portend 1278.00, which can be bottom-fished with a stop-loss as tight as 1.00 point. _______ UPDATE (9:33 a.m. EST): DaBoyz have kicked off a new week with the by-now familiar Monday morning short-squeeze. Based on no-news-is-bad news, it'll turn lethal above 1334.75.