August 2011

Gold impulsed upward yesterday and might soon challenge its record high of 1917.90, which is attended by two Hidden Pivots as if by a pair of bodyguards.  Tuesday's high in gold extended the post-plunge retracement by a few dollars, cancelling the active bearish pattern that we noted in yesterday's edition.  The futures reversed three ticks below an important midpoint pivot whose sibling "D" target of 1912.80 is five dollars and a dime below the all-time high price of 1917.90.  Less than four dollars above that record, at 1923.80, is the midpoint of a very large and important pattern which projects all the way to 2142.30.  The anti-gold cartel might be expected to fight hard as gold approaches or just surpasses its current all-time high, not least in order to fend off the milestone of $2000 per ounce.  With two significant pivots so close to the high, the trading up there promises to be very interesting.  (Posted by Doug "harry" McLagan)

Index futures were being coy around dinner time Monday, doing nothing, but Gold on the other hand look to be revving up for a $25 finishing stroke to the day's encouraging beginnings.  Stay tuned for Doug 'Harry' McLagan's bullion touts due out later this evening.

I'd love to be able to say more about the dollar, but the medium-term charts have been constipated for months.  Presumably, there are two supports being defended by the Powers That Be:   early May's lows, just beneath 73; and the Maginot Line at 70. From a Hidden Pivot standpoint, the downside looks no worse than 73.09 on the next bout of weakness (see chart).  Alternatively, the futures would need to thrust above 75.75 to hint that something interesting was going on.  My suggestion is to set an alert at these numbers -- and to wake me if one or the other is hit.

[In the essay below, Rick’s Picks forum regular Robert Moore explains why a resource so very abundant as silicon could have value, but also why, like so many other physical things, most particularly gold, it is continually increasing in value relative to the U.S. dollar. RA] Why all this recent focus on value? There is so much banter and opinion circulating today about “intrinsic value.” Most often, I see the term being applied to competing monetary instruments: Gold versus government-issued paper currency. Everyone insists that their monetary instrument of choice somehow has more intrinsic value than the competition. While I find these arguments entertaining, I can’t help but dwell on the fact that both points of view are completely short-sighted and arbitrary, to wit: 1) Gold has value as an electrical conductor that does not corrode. In fact, a ship wired with Gold would be able to sail the oceans for millions of years. This makes Gold vastly superior to copper, which corrodes and loses its conductivity exceptionally fast in the presence of saltwater. Now, just imagine an entire Internet wired with Gold -- such a knowledge base would be nearly as timeless as the Universe; and 2) paper has intrinsic value in the fact that if we did not produce it, there would be far more trees around, and therefore less atmospheric CO2. So, paper is incredibly valuable to those who wish to preserve the fear factor that humans are destroying our planet via climate change. Okay, the above points are intentionally facetious, but they are meant to drive home the point that value itself is subjective, and that arguing about it might forever label you as a fanatic (especially if the basis of the argument is a certain yellow metallic substance) When people argue “value” in monetary terms,

It was stumble-step-step-stumble yesterday, but because the futures got past a minor Hidden Pivot resistance I'd flagged at 1215.00, they should be presumed on-track for a run-up to 1241.00.  The action was so erratic that there will probably be little value in my suggesting a camouflage strategy for Tuesday night.  In fact, the futures were weakening as we went to press, and a further 10 points of downside from here, exceeding a prior low at 1192.00, would turn the hourly chart bearish.

All was quiet shortly before 1 a.m. EDT, with bullion trading near the day-session close and S&P  index futures off slightly. The latter should be good for a 30-point rally, however, if it can get past a Hidden Pivot midpoint whose precise location is noted in today's tout for the E-Mini S&P.

A midpoint support at 136^25 has been violated by half-a-point, suggesting more downside  awaits to 134^09.  Accordingly, we should try to get short near the 137^28 midpoint resistance of the retracement pattern shown.  Entry should be via camouflage only, based on the first bearish abc that occurs on the 15m chart or less. Please note that if the futures push higher without correcting to suit our needs, the logical rally target would be 139^11.

Voracious buyers chomped through resistance near 1200 so easily yesterday that we can only infer the futures are headed for the 1241.00 target shown.  Camouflage buying opportunities will be tough to find, considering the steepness of the rally, but if the future should pull back to the 1176.25 midpoint of our rally pattern, that's where I would suggest looking. More immediately, the night session high at 1210.0o precisely equals a Hidden Pivot resistance derived from the hourly chart (A=1111.25 (8/21, 8:30 p.m.), B=1188.50, and C=1132.75) so any movement above it, even slight, would augur further progress toward 1241.00. That would be reason to seek out bull trades aggressively for the next 25 or so points.  One caveat:  a minor hidden resistance at 1215.00.

[Our longtime friend Tom McCafferty, a veteran commodity trader and author of numerous books on the subject, knows a thing or two about making hay when stocks and commodities turn volatile. In the essay below, he explains why the markets have been so nervous lately.  Fortunately, in the violent swings that have been occurring from day to day and week to week, he sees the trading opportunities of a lifetime. RA] Recently, Rick did some of that great technical analysis he is known for, and after he studied the formation the bones made on his sacred cloth and cut open a few toads to check their entrails, he came to the conclusion that the Dow Industrial Average is headed for a bull rally.  Next we took a look at the fundamentals – the European banking situation, upheaval in Africa, labor problems and loss of competitive edge in China, the U. S. job and housing markets—and we grew very bearish.  In other word, today’s Market is like a Joyce poem: you can read into it just about whatever you want. We become further confused when we see so many strong companies sitting on tens of billions of dollars, and, at the same time, they are laying off staff.  With their fat bankbooks, there are just too many of them striving to get leaner and meaner.  On top of that, quarterly earnings are pretty damned good.  We needed a good reason for this behavior. Then it dawned on us.  It was so simple we were embarrassed.  The whole world is suffering for a “Compliancy Complex.”  You will not find that dysfunction described in any medical textbook, but we know in our heart of hearts what it is.  There is just too much unexplainable information overwhelming us at one time, to wit: •