June 2011

All seems just a little too quiet as we head into week's end, although it's possible the broad averages will snooze for yet another two days. Check out the forecast for Silver, since it's inspired by an ever-so-subtle, bullish sign.

A rally pattern that closely matches one proffered in Gold today points to 34.900, so July Silver's three-cent overshoot is a bullish sign for the near-term -- one perhaps very subtly hinting that gold could forge higher into week's end.  Traders should attempt to make use of several peaks recorded last Friday on the way down, since they are clustered tightly enough to be regarded as "vague" points of resistance by our competition.  Vague they most surely are not from a  Hidden Pivot perspective, since a move even slightly above any of them would generate a bullish impulse leg on the lesser charts.

The futures have lifted off a key, 1503.10 midpoint support, but that doesn't mean they're out of trouble. In fact, at yesterday's 1513.80 high, they were no farther above the pivot than they were below it at Monday's lows.  Be that as it may, we can still use the 1516.50 target of the pattern shown as a minimum upside objective for today.  Beware, however, of a more-than-minor top there, since the pullback from Wednesday's peak somewhat exceeded the 1510.10 midpoint of the rally pattern.  Looking at a somewhat bigger picture, it would take a pop today above the 1526.50 peak recorded a week ago for bulls to get something serious going.

A 1317.25 midpoint pivot is equivalent to an important one that I've given today for the Dow. If the futures are able to close above it for two consecutive days, it would hint of a strong follow-through to as high as 1382.25, the midpoint's 'D' sibling.  Because the correction from early May's peak has had so many false starts higher, however, the midpoint cannot be deemed as reliable as one occurring in a straightforward b-c correction.  Although that means we cannot short there confidently with a tight stop, we can and should look for a minor abc downtrend from around 1382 that we could leverage to get short in "camouflage" fashion.

I've alluded in today's commentary to a 13182 target, but this chart shows its provenance in greater detail.  Notice that the 12523 midpoint pivot, which is about as high as I think the Indoos could actually get, lies somewhat shy of  May 31's mini-Matterhorn at 12574.  However, if a thrust were to exceed that last number, as well as the 12633 peak just to the left of it, that would all but clinch the move to 13182, notwithstanding the daunting resistance of early May's 12875 peak.

Gin up a garden-variety short squeeze in the index futures Sunday night, add a dollop of surprisingly less-than-horrific news from Europe, and before you know it the Dow Industrials are in an upthrust that could carry another 900 points, topping 13,000.  That’s not the way things were supposed to play out.  The story had it that the Fed would do everything in its power to force stocks sharply lower so that investors would flee into the dubious safety of Treasury paper. That in turn would strengthen the dollar, paving the way for yet more promiscuous monetization after this afternoon’s expiration of the abortive QE2 program.  Perhaps the Masters of the Universe are still planning to implement this scheme, but with stocks falling from a higher, giddier plateau?  We should know within a few weeks. Meanwhile, in theory the central bank will have some time to play with, since the Fed’s budget allows for the purchase of Treasurys with the interest on Treasury paper already held in its portfolio. (Ah, yes: How can it be called “monetization” if the Fed is actually “paying” for the Bills, Bonds and Notes it buys?) We’ll leave it to bloggers and the not-quite-ready-for-prime-time media to examine the Fed’s method of paying for whatever it must buy at the next auction.  They’re likely to find elements of Ponzi, Rube Goldberg, and Bernie Madoff, but they’ll first need to get past the stench of it to peel away some layers. In the meantime, with sovereign banks, U.S. households, hedge funds and other would-be buyers becoming increasingly skeptical toward Treasury debt, it seems plausible the central bank will deplete its interest “income” more rapidly than policymakers might hope. What to Look For Concerning the stock market, lest our bullish forecast worry or frighten any right-thinking permabears, we would

The September contract has gotten close to an important intermediate-term target at 1.5859, a Hidden Pivot support. Traders can bottom-fish there with a stop-loss as tight as six ticks, but we should also be alert for a strong bullish reversal if the futures push above the 1.6051 peak-let shown in the chart without having first achieved 1.5859.  If that occurs, I'd suggest dropping down to the 15-minute chart or less to find a camouflaged entry spot for a trade from the long side. _______ UPDATE (July 4): The futures have lifted off the tarmac but are having trouble getting  loft.  My upside target is 1.6165, forty ticks above the so far high of the rally cycle begun in late May, but it sibling midpoint at 1.6061 appears unable to contain the pullbacks.  The action is mildly bearish and could presage a drop to at least 1.5949, or, if it fails, perhaps even to 1.5773. _______ UPDATE (July 10): Before we all get bored silly, I'm taking this vehicle off the sheets.  Please wake me via an-email if it does anything, since the targets are still valid.

There are subtle signs of strength worth heeding in the chart that accompanies today's Silver tout. The chart is not for novices, but it should make sense to more advanced Pivoteers who take the time to study it closely.  And by the way, there may even be a trade in the pattern if it develops as shown.  (Click here for a free trial subscription and access to the 24/7 chat room if you are unable to access the chart.)

Shortly after 1 a.m., Silver has gone bullish on the 30-minute chart (although not on the hourly), having surpassed no fewer than two internal peaks and two externals.  The bigger picture remains too bearish to buy aggressively at these levels, but I've sketched out a camouflage possibility that would at least cut risk down to size.  In this case, there were two choices for the k-A segment, but I've used the longer one just to be certain the futures have gotten a good rest before they attempt a C-D follow-through. The minimum retracement is calculated at 33.975 -- still a tad below the so-far correction low at 34.050 as of around 1:15 a.m. EDT.