November 2011

To see the forest rather than the trees, I've taken a few steps back in the chart that accompanies today's Silver tout. You can see for yourself how the correction since late September's low is getting heavier with each passing week.

Seen from a distance (see inset), a bearish pattern auguring a fall to at least 28.385 is sufficiently distinctive to be called compelling.  Bulls could remedy this -- or at least reduce the odds -- with a thrust above the 36.680 nubbin highlighted in the chart. However, the longer the futures hover without having done so, the heavier they will become. The picture would be less bearish if the correction had exceeded an external peak. In fact, there are none until 40.780.

The failure of yesterday's high, by two ticks, to exceed a prior peak noted in my commentary telegraphed the weakness that was to follow.Looking at a somewhat bigger picture, 1832.90 is still the number to beat for the near term, since that's what it would take to turn the daily chart impulsively bullish. If the futures instead continue lower, the first place we might look to do some bottom-fishing -- preferably using the 'camouflage' of the lesser charts -- would be at or near 1765.30, the midpoint support of the pattern shown. It looks promising because it is located, so to speak, in the middle of outer space.

I'm establishing a tracking position for your further guidance, since yesterday's high came within 9 cents of a 99.60 rally target that I'd promoted aggressively as a "can't miss" top.  Assuming four contracts shorted at the target and two exited at 98.44 -- halfway between the high and the so-far pullback low -- we are hypothetically short two contracts with an effective  cost basis of 100.85.  Now, you can cover one at will -- the futures are currently trading for 98.31 -- and tie the remaining 25% of your position to a fixed stop-loss at 99.41. Our new cost basis for the remaining contract (or 25% of the original position if more than four were bought initially), imputing paper profits so far, is 103.39  ______ UPDATE: Crude Whoopee Cushioned higher, stopping us out for a profit, on paper, of slightly less than $4,000 per contract.  Now, it looks to me like the futures could reach 108.67 on this run-up, so if you apply your profits to a next trade, your bias should be bullish.

A bearish target posted in the chat room yesterday morning caught the intraday low by two ticks, implying that the rise and fall of the broad averages is still more or less predictable despite hysterical volatility. A key clue -- useful yesterday in bullion as well -- came in the form of small rallies that had failed to exceed minor peaks impulsively.  Today's all-but-certain flatulence would encounter Hidden Pivot resistance at 1260.50 if stocks move higher, or at 1242.25 if lower. _______ UPDATE (2:28 p.m. EST):  The expected flatulence, which took the familiar form of a do-si-do of gratuitous ups and downs, has topped so far at 1260.25, a single tick from the bullish target noted above.  If you got short, cover half now and manage the rest catch-as-catch-can.

From David P. Goldman, aka "Spengler," comes a trenchant geopolitical analysis with some startling conclusions.  Among them is a picture of Islam in decline due to precipitously falling fertility rates and a fatal clash with modernity. Europe is well on its way toward economic ruin as well, says Goldman, although the U.S., with its rapidly growing immigration population, will be in a commanding position to fulfill the demand for services and manufactured goods that an increasingly prosperous Asia, South America and India will demand.   Click here for the full interview with Frontpage.

Auerbach & Grayson analyst Richard Ross sees big trouble ahead: "My intermarket analysis of the major macro components continues to suggest that the Bullish posturing in risky assets belies a macro backdrop which remains on the verge of collapse." For the latest, 27-page report from A&G, click here.

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.