Tuesday, June 28, 2011

A dour forecast for September Crude (tradable by-my-numbers, by the way) lends weight to a bearish bias in bullion.  The implied fall in oil amounts to about 6 percent, and although this capitulation move may not happen today, the target itself at 85.98 is quite compelling.

A downside target at 85.98 is equivalent to the one at 85.07 given here earlier for the July contract.  Whether you plan on shorting the next leg down, or getting long at the projected low, I'd suggest using the 15-minute chart of less for camouflage. Bottom-fishing will be the easier and less risky of the two trades, since shorting such a mature downtrend is always tricky. However, since the bull play would require a stop-loss of at least 21 cents, camouflage is suggested for leveraging the low.  If and when 85.98 is approached within 40 cents, you should start looking for the abc upturn on the lesser charts. Most immediately, the futures look bound for a Hidden Pivot at 87.00 if they take out its sibling midpoint at 89.96. ____ UPDATE: The futures have reversed from a so-far low at 90.17.  The target remains valid in theory, but we'll move on nonetheless.

I've provided some big-picture numbers for Gold that go with a bearish outlook for the near term.  In Silver, however, I'll offer some lesser benchmarks so that you'll be alert to any subtly bullish signs that may emerge overnight.  The most promising 'external' peak for buyers to use for camouflage lies at 33.885 (see inset). Because it is not an especially distinctive peak, a rally that exceeds it by a tick or two (or perhaps three), and then pulls back would offer an excellent buying opportunity on any follow-through c-d leg. ______ UPDATE (11:47 a.m. EDT): A pullback from above 33.885 (from 34.135, actually) tripped a losing trade around 5:30 a.m. with entry signaled on the 15m chart at 34.045. The move did not quite make it to the 34.170 midpoint pivot, so the trade would have been stopped out for a small loss. Since then, it has been 'dueling' impulse legs, hinting of turgid action in the hours ahead.

As prominently noted in today's commentary, August Gold will face jeopardy down to as low as 1446.90 if the 1053.10 Hidden Pivot midpoint of the pattern shown gives way. As of late Monday night, the support had been exceeded by more than $12, suggesting the move may already be under way.  Alternatively, it would take a poke above 1526.50, and soon, to turn the intraday charts bullish.

How very exciting yesterday was, what with the futures extending by yet one more session the soporific sine wave they've been tracing out for the last two weeks.  The entirety of yesterday's rally exceeded few prior peak of importance, even on the five-minute chart, and so little was accomplished toward the task of eating up supply.  Night owls can nonetheless try to leverage a pullback from just above the 1281.75 peak shown to 'camouflage' their way aboard a low-risk long. An ostensible Hidden Pivot target lies at 1298.50 -- the result, on the 15-minute chart, of A=1252.25 on June 16.  More imaginatively (i.e., on the 240-minute chart, where A=1285.25 on April 18 and B=1367.50 on May 2) a rally could go all the way to 1367.50 without hitting any important Hidden Pivots. _______ UPDATE (11:40 a.m EDT): Based on the 'camo' pattern shown in the chart, the futures tripped an entry signal at 1281.00 near the opening. They've decisively exceeded the 1284.00 midpoint of the pattern and should be presumed bound for a minimum 1289.75, the 'D' target.

Comex Silver ended the day near the edge of an abyss, threatening to plunge, eventually, to as low as $25 if even mild selling continues for the next few days.  Specifically, our downside target for the July contract would be $25.13 if the futures were to settle for two consecutive days beneath the key low at $32.30 recorded on May 12. That number is what users of our proprietary trading system call a “Hidden Pivot,” and we were initially encouraged when the futures reversed very precisely from it and moved higher over the last few weeks. However, although the rally has looked constructive, it still needs to surpass the two labeled peaks shown in the chart to clinch a bullish outlook for the intermediate- to long-term. Unfortunately, the rally appears to be dying without having gotten past the two crucial highs, implying that the big A-B-C down-pattern will complete to its ‘D’ target at $25.13.  That number is the Hidden Pivot “sibling” of the $32.30 midpoint pivot, and if it were to be achieved, it would represent an almost precise 50% retracement from early May’s highs. Of course, the futures could still get second wind and steam higher, emerging from the danger zone with a print above 42.325 (Peak #2).  But it would take quite a leap from here – about 25 precent.  Moreover, in order to re-energize bulls sufficiently to vault Silver above $50, the rally would need to traverse the entire $2.85 distance between peaks #1 and #2 without a significant pause. In the meantime, as noted above, the futures will remain vulnerable to a 25% downdraft to $25.13 if they slip decisively below $32.30. Worst Case for Gold Although Gold futures have looked somewhat better, the decline of the last several days has brought them even closer