Monday, November 14, 2011

Silver's small rally out-of-the-chute Sunday night is little better than Gold's, hinting that they will merely reinforce each other's timidity on Monday unless news arrives in the form of a fresh Eurocrisis. That said, the December contract is working on a legitimately bullish impulse leg, albeit a very minor one, that at the moment augurs at least slightly higher prices. There has already been one 'camo' long in this dither that would have produced a "successful" trade to a minor, 34.855 midpoint, but we should wait for a fresh 'camo' signal predicated on a pullback from above 34.985 before we even think about pouncing.

The futures have made some bullish headway Sunday night, but the effort has noticeably fallen shy -- by just two ticks -- of an important 'external' peak at 1797.70 shown in the chart. This is a sign of timidity, if not weakness, but we should continue to insist that rallies are properly impulsive before we get carried away by premature bullishness. What that implies for the bigger picture is that the December contract will need to take out the 1832.90 peak from September 19 to turn the daily chart decisively bullish.  In any event, let's keep a close watch on how it handles the aforementioned peak at 1797.70., along with its more daunting siblings at, respectively, 1889.10 (September 9) and 1923.70 (September 6) , the all-time high.

I'm keen on shorting this vehicle speculatively, although not via a trial-and-error process of leveraging minor Hidden Pivot resistance points as it moves higher (if it does). If a promising pivot should surface we'll attempt it, but for now I'll recommend shorting near the trendline shown in the chart.  It will come in at around 58.77 next week if this up-cycle takes another 5-6 days to complete.  My choice of vehicles would be December 52 puts, but stay tuned for further details in case things don't play out as we might wish. ______ UPDATE: Cancel the order, since the Cubes bearishly failed to muster the feeble thrust it would have taken to reach the trendline. We'll find other ways to short this incipient brick, so stay tuned.

Chat-room buzz over the weekend seemed mildly fearful of a stock-market collapse this week.  One poster said that if it did not occur on Monday, shares would simply head higher; another gave the impending disaster an entire week to get rolling. We see nothing so threatening in the charts, although there has been a perceptible quickening of the drumbeat for a pre-emptive strike on Iran's growing A-bomb capability.  Were that to occur, sending the price of oil to $200 or more overnight, we would surely rather be short the market -- for the remainder of the decade --than long.

Stocks came roaring back to end the week on an ebullient note, supposedly encouraged by the latest evidence that Europe is finally putting its financial house in order.  While the New York Times resisted the temptation to spread this drivel across the top of its weekend editions, the Wall Street Journal eagerly took the bait, offering up the following headline:  “Europe Pulls Back From Brink”.  Time for a victory lap for Europe?  Not so fast. While we’d like to think that somewhere in the nearly 800 words that followed, the four Journal reporters credited with writing this mush-up would have provided some further details of the latest “plan” to “save” Europe, no such details were forthcoming. As far as we could determine, the manic buying spree that lifted the world’s bourses on Friday took its inspiration from whatever ephemeral hopes attach to the political ousters of top leaders in Italy and Greece. Perhaps that’s why the Journal went no deeper than a single quote from some hedge-fund dorkwad  to substantiate the premise of a headline saying that Europe had “pulled back” from the brink. Here’s the quote, in case you, too, are looking for a reason to buy stocks come Monday:  “Hope for better management in Greece and Italy is causing the market to breathe a bit of a sigh of relief.” That’s it. Re-read the story a dozen times and you’ll find no further explanation. Recall that earlier in the week, the speculators and algo traders who have come to dominate the world's bourses sold the Dow Industrials down nearly 400 points in the space of a few hours,  joining in a global avalanche that caused hundreds of billions of dollars worth of valuations to evaporate. So why the sudden leap of faith on Friday?  We’ll probably never know.

A 1305.25 rally target drum-rolled here earlier is still a logical minimum objective for the near term.  Trend-trading is limited to the very lesser charts, and so I'll suggest that camouflageurs take their cues from such look-to-the-left peaks as are evident in the accompanying chart.  _______ UPDATE:  The futures made their intraday low at 1243.50, two ticks from a bearish target at 1243.00 posted in the chat room shortly before noon EST, when the December contract was trading around  1255.  As I noted at the time, the weakness should be viewed as an installment on some bearish, bigger-picture targets below 1200.