Wednesday, October 26, 2011

The bullish pattern in December Gold that I pronounced "good enough for government work" is evident in this vehicle as well and projects to 35.870, a Hidden Pivot resistance. For trading purposes, we can start with the impulse leg at the right-hand edge of the chart. It has achieved impulsive status in night trading, exceeding a key peak at 33.585 recorded on September 27. My gut feeling is that the first point 'C' will be stopped out in the manner shown, so caution is advised if you are using "camouflage" to get aboard.

December Gold broke sharply above a 1704.90 trigger price that we've kept in mind for the last couple of weeks. This created a bullish impulse leg on the 30-minute chart and also put into play the 1766.50 targe of the pattern shown. The pattern is far from ideal, since it is not even properly impulsive. But the look of it seems sufficient for government work, which in this case means providing us with a serviceable minimum upside objective. Note that if it is achieved, it will refresh the bullish energy of the 240-minute chart by exceeding the 1757.90 peak from September 22.

From a Hidden Pivot perspective, yesterday's thrust in this vehicle was more impressive than the one considered in today's Silver Wheaton tout. Specifically, the Gold Bugs Index has already cleared an 'internal' peak -- one of two that must be exceeded to create a robustly bullish impulse leg on the hourly chart. (The second lies at 568.69. See inset.) It's a fly-or-die situation, since a failure to hurdle these peaks straightaway would leave HUI in technical Purgatory.

Silver Wheaton is within striking distance of an 'external' peak which if exceeded would signal the genesis of a powerful impulse leg with the potential to turn the intermediate-term picture decisively bullish. It lies at 34.61, exactly 1.70 points above the high of yesterday's spike.  In order to be valid as an impulse leg, the thrust would need to be unpaused (i.e., have no b-c correction) once the internal' peak at  33.02 is surpassed.  Rather than speculate, we'll wait for the stock to tell us whether it is ready to emerge from the woods.

A 1256.50 rally target came within two points of nailing the top of a nasty bull trap that saw the futures plummet 32 points overnight.  Most of the carnage came in the space of two hours; however, it would have been very difficult to get short at the top, since camouflage opportunities were nowhere to be found, even on the one-minute chart, when we reviewed the E-Mini's charts during yesterday's weekly tutorial session.  The rebound thus far has been feeble, and there's an unfulfilled downside target at 1214.75 that will remain valid unless the 1241.75 point 'C' of the pattern is exceeded to the upside (see inset). As a practical matter, however, bulls would regain the offensive with a thrust exceeding 1232.00, just four ticks above the so-far high as of around 1:45 a.m. EDT.

Rick’s Picks occasionally publishes opinions with which we disagree. The inflationist argument below, bullish on stocks but also on gold and silver, comes from our savvy friend Chuck Cohen. On stocks, at least, if not on bullion, Chuck’s scenario goes against our own expectations, since we’re looking for a global economic bust that would send shares into a steep dive before year's end. While this could also push gold and silver lower, we still expect precious metals to perform well in relation to all other classes of investables. Economic expectations aside, the broad averages have broken above the tedious sideways correction of the last six weeks, and the charts of many key stocks are undeniably bullish. There are also less-than-subtle signs that the Fed is eager to get QE3 under way with the explicit goal of pumping up stock prices.  Keep these things in mind as you read Chuck’s contrarian take on the markets – a follow-up to a piece he did two weeks ago that we disseminated to paid subscribers.  If you’d like to contact Chuck directly about his financial consulting services, or about mining stocks in particular, click here. RA] Following the recent move up in stocks, I want to update my piece of October 4 (A Bottom Is At Hand) by making some comments regarding stocks, and more importantly to the gold community, about the disappointing lag in the precious metals. First, the stock market. In just two weeks, while the media and most investors continue to dwell gloomily on the financial landscape, the Dow has recaptured almost 1400 points (13%.) Today we are closer to the April high than we are to the recent low. In fact, both the market behavior and the Dow chart are remarkably similar to those of last year at the bottom in August. (The