Thursday, September 1, 2011

Silver broke through its Sunday-night high on Wednesday (a day after gold did) and continued edging up toward the 43.060 target that was noted here yesterday.  Because we are still focused on that target, let's take a look at something that played out on Wednesday in the silver market and in our chat room.  I decided not to include in yesterday's silver tout a smaller pattern that was taking shape and which, with a pair of "A" points, projected to "D" targets of 42.020 and 42.090.  The attached chart indicates why the pivots in that area did not seem sufficiently hidden to justify a trade recommendation.  The specific fear was that, as mentioned in the tout, silver was in position to impulse powerfully through a number of prior highs.  In the early afternoon silver popped up to 42.025 and then quickly fell fourteen cents from that level.  It doesn't look like much on the chart, but a trader who had seen the pattern ahead of time (and perhaps some did) might have been able to grab a quick $500 per contract.  Bear in mind that the 5000-ounce COMEX silver contract is worth $25 per tick and $50 per penny.  At that time I posted both targets in the chat room but also said that I was not recommending any action.  Nine minutes later, silver climbed to its high of the day at 42.095.  Less than two hours after that it made a low of 41.330, or $3800 per contract below the target.  This experience should stand as a reminder that good-looking patterns are going to give us their share of accurate midpoint and "D" target reversals, and that someone who takes one small risk after another trading these pivots is likely to come out well ahead over time.  "P" and

Gold bounced off of another midpoint pivot on Wednesday, and the new pattern gives us at least one more upside price target to watch.  This one is at 1872.50, and we say "at least" because there is a second possible "A" point for the pattern which projects up to a "D" target of 1880.60.  The midpoint sibling of the higher target is 1847.10, a level which might be too close to the "B" point to justify a trade.  The pair of "D" targets, however, are both well hidden, and the odds seem to favor at least one of them rewarding a short sale.  Traders wishing to short the 1872.50 target should consider selling at 1871.90 with a stop at 1873.10.  For the 1880.60 target, orders at 1879.90 (sell) and 1881.30 (stop) are recommended.  These stops should not be tightened, but the selling levels can be set a bit closer to the pivots if you prefer to lessen the amount risked.  All of the pivots discussed here depend on the pattern's "C" point of 1813.60 not being revisited.  Note also that the comments made in yesterday's gold tout remain in effect.  (Posted by Doug "harry" McLagan)

The near miss of the rally target shown in the chart suggests Crude might be ripe for shorting, although for once I'll leave the challenging task of camo-ing your way aboard to you.  There was a southbound impulse leg developing on the 15-minute chart as we went to press, but it was stumbling at the midpoint support, perhaps hinting of a bullish feint.

Considering that yesterday was the last day of the month in a week typically bursting with bullish Labor Day seasonality, the Dow's 54-point rally ranks pretty low for Wow factor.   On the other hand, the fact that a 1241.00 Hidden Pivot target in the E-Mini S&P demands that bulls -- all two of them -- slog at least somewhat higher before they take a rest, is testimony to staying power of this presumptive bear rally.

A 1241.00 rally target, as stale by now as a potato chip discovered under a seat cushion, is still our featured number for better or worse. Forget about camouflage, since the trek to our target is producing as many shorting opportunities as buying opportunities. Most immediately, there's a minor rally pattern projecting to 1227.75, subject to interference at a 1220.75 midpoint that has yet to be reached. (The high so far is 1219.25).