Thursday, April 28, 2011

Although I expect some base-building for a while near $50, Silver looks eager to refute the notion that that number represents a serious barrier.  Check out today's tout for the May Comex contract if you want to see what I think is possible over the near-term.

There are no clear markers for predicting the magnitude of the next thrust, but the longer it takes to build a base near $50, the further it will go.  More immediately, bulls are stealing up on a 49.670 midpoint resistance whose breach, especially on a closing basis, could set up a follow-through to as high as 54.725 over the near term.

The 1533.40 rally target given here earlier, a Hidden Pivot resistance, is very much in play, subject at any time to a possible swoon to 1512.70, its sibling midpoint. A more important target, previously given, at 1581.20 looms as a potentially important high. Its midpoint is 1446.50.  _______ UPDATE (1:26 a.m. EDT): Gold has surged $18 so far tonight, slightly exceeding my target with a so-far high at 1534.00. The next Hidden Pivot -- a major one -- lies just $47 above, and at this rate it's going to be hit a sooner than I had imagined.

We hold 300 shares with a 42.01 basis against three June 40 puts @ 2.35.  Yes, Wednesday's rally looked pretty good on paper, and we especially enjoyed it because we are net long the stock. But we should restrain our enthusiasm until such time as SLW exceeds a look-to-the-left peak at 44.23 that can be found on the five-minute chart (4/11).  The 36.35 downside target is still valid in theory although hardly a threat at the moment.

Say one thing for the central banks: Even if they've managed to set financial Armageddon in motion, they've done a darned good job holding the yen steady as Japan deals with concerns bearing on its very survival. Arguably, the stakes were too high to fail, since an unwind of the yen carry-trade would, for starters, devastate the dollar and the rigged market for U.S. Bonds.  Take out the wobble caused by the Earthquake and its aftermath, and the weekly chart has been flatlining for a year-and-a-half.  That's like driving the Baja 1000 with a cup of coffee on the dashboard and not spilling a drop.  So what's the technical picture look like for the yen?  More of the same would be my guess.

This Mother of All Bear Rallies being what it is, it's not rocket science to forecast higher prices every day, week after week, month after month, nor is it even slightly difficult to identify Hidden Pivot targets that tend to catch the exact peak of nearly every short- and intermediate-term rally that occurs.  But to be candid, it is getting very bor-ing, especially since the only big winners in this game are buy-and-hold idiots who have blithely stayed on board since 2009. So where is the stupid rally headed today? Why, to 1371.00, precisely, is where! A stall could happen at 1359.00 -- precisely! -- but I'll leave it to you to make hay with these numbers. Today's ES chart expropriates a line from that academician of eternal notoriety, Prof. Irving Fisher,

[Responses to this commentary have been so illuminating and provocative that I am going to let the discussion run for another day.  If you read them all, you may come away believing, as I now do, that neither the hyperinflationists nor the deflationists can claim to know for certain how things will play out. That said, I consider FOFOA's hyperinflation arguments to be the best offered by either camp. RA] So, it looks like I’m a hyperinflationist after all.  Reminds me of the joke about the cowboy who chats up a woman at a bar – a lesbian, as it turns out. She tells him she spends her days thinking about nothing but women. “As soon as I get up in the morning, I think about women,” she says. “When I shower, I think about women. When I watch TV, I think about women. I even think about women when I eat. It seems that everything makes me think of women."  The cowboy goes home that night thinking that maybe he’s a lesbian too.  Another tavern, another night:  A stock broker strikes up a conversation with a stranger who seems obsessed with the idea that hyperinflation is about to wreck the economy. “From the moment I open my eyes in the morning, my head is filled with worries about how the financial system and the world’s currencies are hurtling toward disaster. Watching the stock market rise relentlessly, I grow more certain each day that it can only end badly.  I think the real estate disaster has barely begun and that, for tens of millions of us, the American Dream is about to turn into a nightmare.”   “Hmmm,” says the stockbroker.  “I guess that makes me a hyperinflationist too.” And so it goes. A conversation between a hardcore inflationist and an