September 22nd, 2014
Published Daily

Doomed Rally in Stocks Could Cap Gold’s Surge

by Rick Ackerman on November 29, 2011 12:54 am GMT · 17 comments

We have our doubts that bullion prices are about to embark on a major rally, since yesterday’s admittedly encouraging upthrust was tied to a stock-market rampage that, having occurred for all of the wrong reasons, is doomed to fail.  It was in fact a quite nasty bear squeeze that sent stocks soaring overnight. The short-covering panic was triggered by rumors — later denied – that Italy was about to receive an $800 billion bailout.  There were also some news stories over the weekend suggesting that Americans had done their patriotic best to kick off the holiday shopping season with a bang. These two news items, even without confirmation of Italy’s rescue, caused index futures to leap wildly higher Sunday night, all but guaranteeing that the Dow Industrials would open up at least 200 points on Monday morning. This they did, achieving an intraday peak 330 points above Friday’s settlement. Would-be stock traders found themselves choking on dust Monday morning, however, since the gap-up opening left no opportunity to get onboard.

Even so, via actionable advice disseminated Sunday night, Rick’s Picks subscribers could have caught a profitable ride in Comex December Gold. Here’s the trading “tout” exactly as it went out at around 8:30 p.m.:

Europe’s latest bailout, this time for Italy, has goosed the futures into a steep climb. Use 1712.50 as a minimum upside target for now, keeping in mind that anything above that would suggest that plenty of buying power remains to be spent.  For camouflage purposes, you can try getting long if, on the 15-minute charts, the futures create an A-B impulse leg by exceeding the 1708.90 peak from last Wednesday without taking out the more obvious one at 1710.80.  This was occurring as we went to press.

‘Camouflage’ Trading

Ultimately, we exited the trade with a theoretical profit of about $2,200 after recording some paper gains earlier in the day on a portion of the initial four-contract position. For the uninitiated, “camouflage trading” is the proprietary technique we use to initiate trades with relatively tiny stop-losses. For example, we rarely recommend risking more than $62 theoretical per contract in the E-Mini S&P, even when we are trying to establish a long-term position. If you’d like more information about this technique, simply click here.  And if you think you could benefit from timely alerts like the one above, as well as from access to all of our services, including a 24/7 chat room that draws veteran traders from around the world,  click here for a free seven-day trial to Rick’s Picks.  Finally, if you already subscribe and would like to receive e-mail notification of updates when they are posted, click here and check the box that says “Send me each item as it is posted to the site.”

Incidentally, although we were looking for the broad averages to head lower when Monday’s forecasts went out over the weekend, Sunday night’s bullish action led us to revise the E-Mini S&P forecast with an ambitious rally target at 1198.00. At the time, around 8:30 p.m. EST, the futures were already up about 25 points, trading around 1179.00.  As it happened, Monday’s actual high was 1196.25 — less than two points from the peak we’d projected.

***

(If you’d like to have Rick’s Picks commentary delivered free each day to your e-mail box, click here.)

Take the Hidden Pivot course at your leisure, in recorded one-hour segments. The real-time Wednesday Tutorial sessions, the HP Tutorial video library and a confirmed seat at the next live Hidden Pivot webinar on October 16, 2014 come as part of the package.



{ 17 comments }

jeff kahn November 29, 2011 at 3:44 am

Short Squeeze – or do some traders at the banks know that QE3 is on the way? Bloomberg stories indicate the latter – that the Fed is already buying new mortgage bonds and the ECB is already loading up on sovereign debt. If so this rally could last.

Robert November 29, 2011 at 5:24 am

I doubt that QE rumors could create the type of up action we saw today. Short squeeze, yes, QE rumors, nah.

Besides, the Fed won’t be embarking on any more money printing until it is politically expedient to do so. Near term it looks more like the Fed is positioned to have the ECB and the BOJ do its printing for it.

I took a new long position in AGQ today with a tight trailing stop, and hedged by selling some out of the money June and Dec 2012 puts.

Isn’t it hilarious (read: pathetically sad) that traders and market analysts have completely migrated away from trying to time the markets based on supply, demand, and technicals, to spending nearly 100% of their energy trying to time the Fed?

What happened to the days when people only paid attention to the specific markets or tickers that they wanted to buy or sell? Today it seems like everyone is a wannabe Central Banker.

Samuel November 30, 2011 at 8:10 pm

Politically expendient to do so arrived this morning.

Cam Fitzgerald November 29, 2011 at 8:15 am

Sorry, but the dollar is on a down leg, Euro on the rise. Gold will benefit now as will most commodities. It makes me crazy to read all the guys who keep repeating that PM’s are in a major decline phase (NOT). Santa Claus rally is for real kids, it is coming and some of the biggest gains will be for those who step out in traffic and buy small cap gold and silver plays. That is where it is going near term. No crash, no major sell-off, no problems. The optics are quite frankly terrific for most shares given the past earnings season. Politics tells us that stock buying is an outstanding opportunity now. But let the young fillies flee with the herd.

They always get it wrong.

Cam Fitzgerald November 29, 2011 at 2:08 pm

So I am listening to this idiot from Uncommon Wisdom. He is telling me that huge equities declines are coming, that Gold and Silver will fall dramatically (soon) and stocks will sell off.

Doom and Gloom.
Just be patient, a better opportunity to buy is coming.

You can see his video for yourself. The guy is Larry Edelson. I used to like hearing him but he looks drunk in his videos lately. No respect for that. He is out to lunch and out of touch. Old traders like old men fail. Who wants 50 year old hockey players anyway.

Sorry Larry, Gold will be rising on this cycle. Get with the game. The dollar will fall. Euro is in rally mode. With all your charts and graphs and technicals you don’t have a damn clue what is happening anymore.

And take a break from the booze buddy. I liked you better sober.

gary leibowitz November 29, 2011 at 7:19 pm

China looks to be contracting.

The dollar has to hold up better than the EU simply based on their debt restructuring/austerity program.

Gold can not go against the dollar.

The seasonality scenario is fast appoaching and if gold doesn’t catch fire soon it will reverse big time.

U.S. equitiy mover of late is questionable. I am not convinced we have a December rally.

Robert November 29, 2011 at 8:32 pm

Gary-

How does a contracting Chinese economy (assuming I agree with your premise) imply dollar bullishness?

China currently buys a lot of dollars with their trade surplus.

If anything, a chinese contraction seems likely to create an internal credit squeeze on available Renminbi. China (unlike Europe) maintains extremely little internal debt denominated in Dollars, so I fail to see how a Chinese deleveraging event could create a rush out of Yuan and into dollars.

If anything, a contracting chinese economy would create pressure to LOWER the yuan/dollar peg, allowing the CCB to print renminbi.

As China contracts, her trade surplus (and therefore her available liquidity to purchase dollars) also diminishes, yes?

peter November 29, 2011 at 2:43 pm

Regarding Gold:
10 year ago:
- Central banks were sellers
- vast majority was not even thinking about gold
- price very low
Now:
- Central banks are ‘buyers’!
- Lots of places to buy bullion all over the place
- price has quintupled
- all the gold ever mined still sitting around as it was 10 years ago.

In my humble opinion, gold may still go to 10k/ounce, but not with a very significant move higher in the stock market, and companies at least make useful stuff , have patents etc. I bought gold and silver 3 years ago, but recently moved and sold our house, and have been trying to scale into mining stocks with the proceeds for half a year now , and I have to say I am seriously getting tired of it. These stocks are not acting right. There is weakness, especially in the juniors! Now with general commodities in a bear market – I am seriously considering getting into stock indices as soon as they bottom rather than gold. At least in stocks we’ve had a decade long sideways trend / correction.
Peter

Buster November 29, 2011 at 4:04 pm

“What happened to the days when people only paid attention to the specific markets or tickers that they wanted to buy or sell? Today it seems like everyone is a wannabe Central Banker.”

In the absence of a real economy that functions by supplying needed goods & services for actual ‘real’ people’s wants or needs, all we are left with is following that which has elevated itself above those needs of humanity, to place itself as the only relevant entity serving the few. Hence, forget about reality in our world & follow the conjurers’ tricks. You may be hungry & homeless & sick from the medication but hey, look, the stock market says that everything’s fine so what’s our problem!!

Boom, boom, boom!! I hear some say. Everything’s gonna’ be great and the doomsayers proved wrong…..

http://articles.mercola.com/sites/articles/archive/2011/11/29/biotech-industry-campaigns-for-gmo.aspx?e_cid=20111129_DNL_art_2

No! We’re gonna need a little help down here and, whatever the numbers say, some of us can do the math!

Rich November 29, 2011 at 4:34 pm

There is much skepticism re this rally.
Experience teaches us bull markets climb a wall of doubt and worry, while bear markets collapse on overconfidence.
Big4 are long Ags, Crude, PAL, RUT and SPX.
M1 grew +20.8% the last 12 months, +26.6% the last 6 months and 29.2% the last 3 months, far exceeding the -9% and -12% contraction of the money multiplier and velocity.
Looks like a sweet spot to me also Jeff…

scott November 29, 2011 at 5:43 pm

How much longer would you recommend buying gold bullion? At some point it has to start dropping off in price.

Rich November 29, 2011 at 8:06 pm

Take yer pick Bullion Scott:
Jim Rogers dissing gold for dollars,
while
SocGen talkiong about QE3 and $10,000 gold.
Both may be right at different times.
Trading with the LT trend is our friend…

Robert November 29, 2011 at 7:03 pm

Call me crazy, but I bought a financial today – one of Warren’s favorites (not BAC- I’m not quite that insane)

roger erickson November 29, 2011 at 7:49 pm

There’s a sane backdrop to current action. Germany is holding a gun to the PIIGs, telling them to accept a unified Euro-Treasury, or else, by their Dec 9 mtg. And looks like the PIIGs will cave & bow down.

So expect a sustained rally until at least Dec 9?

After that? How long will it take all involved to realize that austerity kills? [If you're trying to escape a bear, and your leg buckles, ... shoot it so you can run faster?]

http://seekingalpha.com/article/310530-is-an-equity-rally-in-the-works#comment-2069503

Rich November 29, 2011 at 10:53 pm

Aloha All
Despite the bullish longer-term outlook,
took profits on CNBC longs in AGQ, FAS, QLD, TNA and NZD/USD and just swung to the short side with FAZ, QID, SDS, VXX and Short EUD/USD:

Rich Cash Alpha Portfolio:
as of U.S. Market Close on 11/28/2011
PLAYERCARD STATS
99.20%
Game Rank Percentile
5416th
Game Rank Position

Rich November 30, 2011 at 6:01 pm

And flip-flopped back long early Wednesday AM.
Oy.
Big4 still long and strong Oil, PAL, RUT and SPX…

Buster November 30, 2011 at 1:08 am

Just announced here in the UK that, despite the auterity measures being implemented to bear on everyone outside the Political & Banking sphere, government borrowing will actually need to be increased this year, & the recession is expected to last till 2015 acording to the latest estimates. ( long enough for the debt collection agencies to rape the sheeple of everthing they can’t afford to keep hold of due to no access to the currency being handed around amongst those in the club.) It is clear the Banksters are in ‘Debt Collection’ mode & in no mood to let anyone off the hook by adding to the availability of currency, other than amongst the inner circle of crooks.
The government also announced that they’ve decided to act in response to the refusal of banks to lend to businesses despite them being previously given billions by the government for this purpose. How do they plan to force the banks to lend the money??…by giving them more state borrowed money to lend!!!
I wish that someone would say it how it is so that the sheeple could grasp just what is happening. Firstly governments do not need to borrow money from private central banks or any other banks. It is rediculous that the people are saddled with debts to the international Banksters because the government have given the power to issue a nations currency over to them rather than the state printing it’s own money.
Secondly, because only the principle of any loan is created whilst the future interest is not, it is inevitable that more money will need to be paid as interst than is in existence. This inevitability is only postponed by another borrower borrowing more debt money into the economy.
In a nushell, the monetary system is a fraud designed to transfer wealth through debts which are impossible to repay. It is thus nothing less than theft committed by those who contol the system. The governments are complicit in this theft against the populations they rule. Rather than upholding their responsibility to issue justice based on the basic principles of common law, governments choose to be part of this theft to increase their own power & that of the elites.
There is nothing complicated about the financial system. It is all smoke & mirrors. It is the Wizard of Oz behind the curtain wishing to blind the sheeple to it’s simplicity with complicated theories and formulas.
It is a criminal system instigated by criminals who will be held to account.

Comments on this entry are closed.