Monday, May 23, 2011

Much as I hate the dollar, its so-far unimpressive thrusts must be seen in the context of correction lows in Gold, Silver and Crude that are holding precariously above midpoint supports.  Check out today's Crude Oil tout, since it details events that would likely send prices plummeting into the mid-$80s.  If this happens, June Gold would go to 1413.50 and July Silver to 25.130.

Crude is in a correction from early May's top that projects to as low as 85.07.  That target is equivalent to the 1413.50 pivot given for June Gold. Although Gold's midpoint support at 1470.00 has held almost precisely, the equivalent number in July Silver, 95.11, sits 43 cents beneath the so-far low.  If that low were to be exceeded on a closing basis for two consecutive days, we would infer that a potential price avalanche lies ahead.  To turn things around, bulls would need to push this vehicle above 102.41 within the next day or two. That would exceed a look-to-the-left peak recorded May 11 on the way down.  It is visible at the level of the 30-minute chart or less.

The rally pattern shown in the chart stalled Friday within two ticks of a 75.74 midpoint resistance, but as of late Sunday night, oh-so-eager buyers have left it in the dust.  This strongly implies more upside over the near term to the 76.51 target shown in the chart.  However, in order to demonstrate real power, as opposed to the phony short-squeeze kind that has launched the greenback from its early-May lows, today's effort would need to exceed the peak at 76.61 recorded on April 1.

Silver has held a crucial midpoint support at 32.300 for more than a week, but it has made almost no headway on the bounce.  On balance, I'm bullish for the near term, but buyers will need to pop above the 39.565 look-to-the-left peak recorded May 4 to seize the advantage. Otherwise, the futures may demand a test of the 32.865 Hidden Pivot midpoint of the pattern shown.  This stands to be an important number because, as you can see, its decisive breach would augur a further drop to as low as 29.28.

A nearly $6 leap on Sunday evening's opening bar has been squandered in the last five hours, and now the futures have dropped back to unchanged, trading for around 1509.10.  There are no opportunities that I'd rate as optimal, but a so-so pattern yielding the 1505.80 target shown in the chart could be used to bottom-fish with a stop-loss as tight as five ticks. You'll be on your own if this one fills. ______ UPDATE (11:03 a.m. EDT):  We did nothing, since a price spike at around 2:30 a.m. exceeded the point 'C' of our pattern, negating the buying opportunity.  Shortly after 11 a.m., trendless volatility was picking up, and the future appeared to be headed, with great difficulty, toward a minor rally target at 1515.10

If you're short the E-Mini S&P from 1358.25, or have no position at all, try bottom-fishing this vehicle near 57.17, the Hidden Pivot midpoint of the pattern shown. This will work as a hedge against the short or, simply, as a cheap bet on a bounce from our number.  The June 57 calls would be a great buy for around 1.03, but be prepared to pay more if they're trading higher with the Cubes within pennies  of our target.  I'll suggest buying four calls, but stop yourself out of them if the underlying trades 56.98 or lower.  On a rally, be ready to cash out half of the position for a partial profit at 57.48. If you would like to know more about the Hidden Pivot Method that we use  to forecast and trade swing highs and lows,  click here and get a free one-week subscription to Rick's Picks. _______ UPDATE (10:52 p.m. EDT):   The trade was a non-starter, since the Cubes began the day a penny above our 56.99 stop-loss and quickly dropped below it.

Late Sunday night, the futures looked bound for 1309.00, a Hidden Pivot support that can be bottom-fished with a 1309.25 bid and a stop-loss as tight as 1308.50.  If the stop is hit, though, look for the weakness to continue down to at least 1303.25.   We continue to hold a single-contract short with a 1358.25 stop-loss and a cost basis adjusted to 1363.00 after we took a partial profit on the original trade.  We're swinging for the fence on this one and plan to forego a trailing stop until such time as there is $5000 of theoretical profit per contract in the position.

Because stocks and commodities sometimes fluctuate for reasons too complex to speculate on let alone predict, we often look to our charts to tell us what diligent guesswork and informed reasoning cannot. At the moment, our attention is riveted on the 10-year Treasury Note, which has been flirting with a major rally target, and by implication, a potentially very important low in lending rates. If so, the implied shift in Treasury paper from bull market to bear is one that we cannot afford to take lightly, since nothing would hasten the country’s descent into economic depression as certainly as the ratcheting up, even slightly, of key lending rates.  Try to imagine the impact of this on, for one, a residential real estate market that has already shed a third of its value since the beginning of the Great Collapse several years ago.  Commercial real estate would be in fatal jeopardy as well, since the accounting tricks that have been used to mask its true condition rival in deviousness even those the Federal government has used to conceal the fact of America’s bankruptcy. We have been predicting here for years that home values would ultimately decline by 70 percent and that the collapse in vacation properties would be even worse, hitting 90 percent.  However, given the unprecedented weakness of these markets in the face of a failed multi-trillion dollar monetary stimulus and a dead-cat bounce in the stock market that has taken more than two years to play out, one shudders to think about how quickly the final phase of the collapse would unfold were the flimsy support of artificially suppressed interest rates to be removed. Watching Dollar Closely We first glimpsed the gathering storm in T-Notes during one of the impromptu webinars that we conduct from time to time during