Tuesday, September 27, 2011

Silver has done tonight what Gold so far has not -- i.e., popped through an external peak on the hourly chart. This could help give buyers legs, but to be sure, night owls should pay close attention to the minor abc pattern developing at the right-hand edge of the chart.  If the first point 'C' gets stopped out and the futures fail to reach 'p' on a second thrust, that would be a negative sign for the near term.  Camouflage will be tricky in any case, since the futures have been rallying more or less continuously since morning.  Note in the chart that the most immediate Hidden Pivot target of significance lies at 31.940.

The so far $105 rally from Monday nights grotesquely oversold lows has yet to exceed even a single 'external' peak on the hourly chart, but we should expect no less if we're going to warm to the idea that the worst is past. Most immediately, that would imply a pop to at least  1666.30 today.  The chart shows why this would be significant from a Hidden Pivot perspective.  Alternative, if the futures fall without rallying above 1640.00, the first place where we might expect a tradable bounce is at 1574.30, the midpoint pivot of the pattern shown.

Our correction target at 644.50 caught yesterday's low within a penny, allowing even those who used a very tight stop-loss to get aboard ahead of a so-far 24-cent rally. If you caught the move, I'd suggest exiting half the position at these levels and tying the rest to an impulse leg-based stop-loss on the hourly chart. This means you should ditch the position if the futures dive through two prior lows without an upward b-c retracement.  At the moment, that would imply a print down at 651.50.  Want to learn how to nail swing highs and lows precisely, and to manage trade risk yourself? Click here for information about the upcoming Hidden Pivot Webinar on October 5-6 and a $50 discount.

Yesterday's fab short-squeeze rally was about what we might have expected, considering that Greece supposedly was finally about to go under, and that the redoubtable Art Cashin was kind of expecting a crash.  Bearish expectations are all the market has going for it at this point, so we may as well sit back and let the bad times roll.  Most immediately, that will mean ignoring this vehicle for the moment, since it ended the day with a fourth-rate cliffhanger in the form of a rally that failed by a tick to exceed the look-to-the-left peak shown in the chart. My bias for the very short-term is bullish nonetheless, but I'll leave it to camouflageurs to make hay.

[Addendum: I misread the date on Lira's piece -- his blog is not one of my regular stops on the Web --  and it turns out that it was written a year ago in August, not last month as erroneously noted. As readers may have surmised, however, that does not weaken or change my argument.  Nor would I claim that it weakens his, notwithstanding the fact that a prediction he made  more than a year has not panned out.  There is a lot of ruin in a global financial system, and although it sometimes seems as though ours may be no more than days from collapse, we all know how even terminal economic dysfunction, like lung cancer, can persist without producing the expected result. RA] With deflation tightening its choke-hold on the global economy, we thought we’d drop in on our supposed nemesis, Gonzalo Lira, to see how he has been coping in these very un-hyperinflationary times.  To his credit, the erstwhile arch-inflationist, bending to reality, has acknowledged forthrightly that deflation rules the economic and financial worlds right now. “Yields are  low, unemployment up, CPI numbers are down (and under some metrics, negative) – in short, everything screams ‘deflation.’ ” He wrote those words a month ago in an essay entitled How Hyperinflation Will Happen, and although we are obliged to point out certain dangers in relying too heavily on the scenario he describes, readers should trust, as we do, that he has gotten the big picture right.  He asserts, for one, that economic recovery is no longer remotely possible for the U.S.  We agree. Nor, as he makes clear, is it a case of double-dipping into recession, as most economists and the mainstream media would have it;  as Lira flatly states, we never emerged from the first recession. The inevitable result, he says – and again we concur -- is that an epic financial panic centered