Monday, April 18, 2011

It wouldn't take much of a rally to create a bullish impulse leg of daily-chart degree, shortening the odds of an eventual push to as high as 126^11 over the next four to six weeks.  Specifically, if the futures exceed March 31's peak at 120^31  and then continue higher, surpassing 122^08 without a significant retracement, that would strongly imply that last week's low at 117^28 was an important one.

We should heed a Hidden Pivot at 1518.70, since it could create a top of at least minor degree equivalent to the target I've flagged in May Silver.  That said, a runaway move to the upside could hit 1581.20, a Hidden Pivot whose midpoint sibling at 1446.10 got demolished two weeks ago. The first evidence we'd have that Gold is  capable of such a burst would become apparent on an easy move through 1518.70.

The rally pattern shown in the chart suggests a stumble at or very near 42.68.  Let's try to get short there, buying four May 41 puts if and when the underlying vehicle gets within 5-8 cents of the target.  If the stock tops where expected and comes down hard enough to allow you to sell the puts for 40 cents more than you've paid, close out two of them. Since there's a chance that the stock will hit 43.32 if it blows past the first pivot, plan on buying four additional puts at that level. _______ UPDATE (11:35 a.m. EDT): A rally spike in the opening minutes of the session carried to 42.50 -- not quite high enough to get us short.  The order is still valid, but, for your information, there was no easy way, even drilling down to the two-minute chart in search of camouflage, to get  short.

The 43.610 target given here last week remains valid, although 43.910 is possible if the futures exceed the lower number by more than a two ticks. The implications of these numbers will be different for each of you, but I'll note once again that the target range looks like a compelling spot for a pullback or even an intermediate top, so beware. _______ UPDATE (10:30 a.m. EDT): The futures have gyrated wildly this morning after peaking at 43.56, a nickel shy of my target. Caution is still advised.

The futures were developing torque Sunday night for a shot at recouping virtually all of last week's losses in a single, algorithm-enabled, short-squeeze burst on or before the opening. So much for all of the hard, hard work sellers put into driving stocks only moderately lower over the course of the last few trading sessions.  My immediate target, based on the minor pattern shown, is 1323.00, but the futures will need to do a little better, surpassing a look-to-the-left peak at 1324.00, to refresh the bullish impulse on the lesser charts. _______ UPDATE (8:36 a.m. EDT): It would be premature to kick back and enjoy Sunday night's refreshing selloff, since all of it so far has yet to create a bearish impulse leg even on the 30-minute chart.  That would occur on a 1306.50 print, although the "dueling" impulse legs engendered thereof would still leave room for a moderately bullish bias. ________ FURTHER UPDATE (9:44 a.m.):  Ahhhhh! How sweet.  This unexpected plunge looks bound for a minimum 1287.25.  You can try bottom-fishing there with a three-tick stop-loss.

I've provided two closely spaced rally targets for May Silver that are likely to show some stopping power.  In any event, traders and investors should pay close attention, since the range defined by these two Hidden Pivots looks very compelling up to the level of the weekly chart (A=26.400). _______ UPDATE (8:42 a.m. EDT): Mild weakness in Gold is holding Silver back this morning, but nothing in the otherwise bullish picture for both has changed.

[My good friend Tom McCafferty is a veteran commodity trader and the author of numerous books about trading, including one of the very best primers available on the put-and-call game, Options Demystified.  More recently, he has written several guest commentaries for Rick’s Picks, among them an upcoming piece in which he will reveal his top choice for all investables – an asset class that has the potential to pay big dividends for generations to come.  In the essay below, Tom explains why he’s bearish on the economy – and on America – these days. RA] Recently, I was asked why I wasn’t as bullish as some of my fellow traders.  The market has gotten off to a respectable start for the year and I didn’t seem as excited as some of our group.  Short-term, I was as mostly long, but long-term I was Smokey the Bear.  These guys demanded to know why I was so low key.  My answer of course was:  “It’s all the deficits, stupid!”  More definitively, it is all the obstacles that may prevent the United States of America from tackling the problems, i.e.: •           Bipartisanship—I don’t think this country has been so divided since the Revolution or the Civil War.  Nothing gets done as all the politicians, special interest groups and powerful unions fight for their special interest and neglect the best interest of the overall population. •           The sheer size of government—you know you are in trouble when twice as many people work for the various levels of government than work in manufacturing, farming, fishing, forestry, mining and utilities combined.  You know you’re in trouble when the salaries and retirement benefits of public “servants” are more lucrative that those producing the gross domestic product.  Fifty years ago, these numbers were reversed. •           Education—why do less