Wednesday, October 5, 2011

I've taken pains, literally, in today's Silver tout to show exactly what bullish hopes are up against. Our opinion about this will solidify with further evidence, but for now we should look at what is with mechanical detachment rather than with expectations and prayers.

In Hidden Pivot terms, Silver's rallies have been failing while its declines have been succeeding. On the weekly chart, there is no getting around the fact that the plunge from August 26's high at 44.295 was impulsively bearish. True, it exceeded January's key 'external' low at 26.410 by just 26 cents, but that was enough to make the difference between a move that would have been simply corrective had the low not been exceeded, and the impulsive move that it actually was. We have no crystal ball, however, and we can only wait for patterns big and small, up and down, to tell us whether the damage will prove fatal.  The futures would need an unpaused rally on the daily chart surpassing August 21's 40.780 high, however to put bulls decisively back on the attack.

The low of yesterday's soon came within 15 cents of the 14.91 'D' target shown, but my hunch is that this stock will fall anew to fulfill the 13.89 target of the larger pattern that is also shown. Price action near their respective midpoints at 17.79 and 17.28 can tell us whether a washout low is indeed likely, but in the meantime, we should take encouragement if the stock thrusts above 18.40 today, since that would create a bullish impulse leg on the hourly chart. We must also take note of a much bigger picture that shows an impulsive A-B breakdown on the weekly chart. This was significant relative to the long-term bull market, but we may not know whether it was fatal until the A-B leg ends, and the rest of the pattern plays out to the 'p' midpoint of C-D, or perhaps lower; or higher.

A so-far picture-perfect pattern points lower -- to the 455.80 Hidden Pivot target of the pattern shown, at least. Odds of this vehicle averting a full correction to the target are slim, since the downtrend gapped through the 512.34 midpoint support on its first encounter with it.  HUI's fate could be annulled by a strongly impulsive upthrust -- i.e., one that surpasses a 551.78 'external' peak -- but before that occurs, it would likely be telegraphed by bullish price action -- which is to say, bullish impulsiveness -- centered on 512.34.

The buzz concerning yesterday's vicious short-squeeze in the final hour was that Europe had finally gotten its act together, but the initially exuberant response to this by-now weekly hallucination was nowhere in evidence Tuesday night. Even so, shorts were caught in the ringer at the bell, and the dirtballs who had promoted the rally by pulling their offers were not easing their grip.  In fact, the retracement from yesterday's end-of-day peak was not even sufficient to bring the futures into a window where we might consider them properly recharged for a follow-through rally. That would require a print down at 1104.25 or lower, versus an actual low so far tonight of 1107.50.  There are no compelling opportunities that I can discern at the moment, but night owls should monitor the pattern flagged in the chart, since, if it plays out according to our rules, a time-limited buy-stop entry at 'X' may be possible.