June 2011

A fragile midpoint support at 36.010 that repelled sellers twice last week has given way Sunday night, with bearish implications for the near term. The 'D' sibling of this pivot lies at 34.160, and it should be used as a minimum downside objective for the near term. Although it would take a rally above the 37.860 point 'C' of the pattern to negate the target, bulls would at least gain the upper hand with a print today exceeding a peak at 36.770 recorded Friday on the way down.

Technically speaking, nothing meaningful has happened since the futures rallied on May 17 from the exact midpoint support of a big pattern that has corrected early May's record high.  The fact that the rebound occurred from exactly where it "should have" is bullish, but Gold has made little headway since.  Most immediately, Friday's steep selloff has stalled within three ticks of the midpoint support shown. While neither  bullish nor bearish, this price action implies that a decisive breach of the 1528.60 pivot would likely send the futures down to at least 1519.20, its 'D' sibling.  You can bottom-fish there with a stop-loss as tight as four ticks, but camouflage is a better way to approach the trade, since the target is closely coincident with a key low recorded on June 2.

Although Monday's tout for the E-Mini S&Ps implies a fall of about 200 points in the Dow, the DJIA's chart itself suggests it could be significantly worse. I've flagged a pattern that projects to at least 11633, exactly 319 points below Friday's settlement price.  The midpoint support here lies at 11908, so if the Indoos open a mere 44 points lower on Monday, they will be on thin ice, vulnerable to a further fall of 275 points. Please note that the pattern itself is a good one, with single-bar price points at all three coordinates and a point 'B' that has properly exceeded an important prior low. Those factors lend a high degree of confidence to the target itself.

The broad averages gave it all back and then some on Friday, justifying our skepticism toward the previous day's surge.  Now, the E-Mini S&Ps looked headed down to at least 1251.50, the Hidden Pivot target of the pattern shown. However, this number is intended as merely a minimum downside objective for Monday, and if it should fail easily, we must heed the possibility that the selling is about to turn into an avalanche.

In Monday's touts for the Dow Industrials and E-Mini S&Ps, I've provided some precise reference points so that we can know whether mere weakness might be turning into a cascade.  Charts are included with both, so check them out if you want to be prepared for the worst.

Thanks to borrowing short and lending long, the central bank could end up losing big money. This Wall Street Journal op-ed piece from George Melloan is one of the most astute and insightful explanations I've read concerning the Fed's -- and our -- dire financial predicament.  Melloan, a former columnist and deputy editor of the Journal editorial page, is author of The Great Money Binge: Spending Our Way to Socialism (Simon & Schuster, 2009). Click here to read the full article.

Silver is trading exactly where it was five weeks ago when the selling dried up to end early May's power dive.  On the hourly chart each and every rally of consequence has died just shy of surpassing an important peak to the left of it. Not that it would take much to re-energize the long-term bull. From a Hidden Pivot perspective, the key high needing to be exceeded is the tiny and obscure look-to-the-lefter at 39.955 recorded on May 4. I've set an alert there, and would suggest that you do the same, to wake us when this modest feat has been accomplished. Until then, the tedious standoff will continue.

Gold's nervous uptrend is running out of headroom, putting increasing pressure on buyers to make their move on early May's record highs. Today's tout for August Gold includes a chart and a detailed analysis to explain why it's time for bulls to ake their move, so check it our if you're growing weary of the wait.

The futures have been nervously biding their time in anticipation of a move above early May's all-time high, 1577.70. Now, however, they've run out of  pussyfooting room, since the June 6 peak at 1555.00 used up the last 'external' peak available for refreshing the bull trend. The next lies at 1577.70, and bulls have an immediate opportunity to get within pitching-wedge distance of it by completing the rally pattern shown in the chart. Signs on the lesser chart are promising, but it's time for buyers to put up or shut up, since more idling at these levels is going to increase the likelihood of a swoon.