Monday, January 9, 2012

A  feisty dollar has passed a key test Sunday night, gapping through an important peak at 81.44 recorded 13 months ago. The next impediment is 81.86, the Hidden Pivot target of the pattern shown. The target is sufficiently compelling that we should expect a tradable pullback from it, but if DXY gets past it easily, it would lend weight to the very bullish outlook we've taken on the dollar.

March Silver spent the week backing and filling following the 14% rally that has kicked off the New Year.  Remaining patient is our only option at the moment, but we can still use the 30.215 'external' peak shown in the chart to tell us when mere noise is starting to sound more like the fearsome snort of a resurgent bull. Camo traders should stick with micro-risk plays on the 5-minute chart, since this vehicle has been creating new point 'C' lows as though every silver trade out there is all too eager to buy.  Want to learn how we use Hidden Pivots and "camouflage" to reduce entry risk to relatively small change? Click here.

The week of flatulence we just endured argues against going out on a limb with an exciting prediction, so let's stick with the unexciting "external" peak at 1645.80 as the number bulls will have to beat before they can crow.  Bullish confidence would take a much bigger leap, however, if the impulsive leg that spears 1645.80 keeps going to 1681.80 before it runs out of energy.

What looks like a conventional double top on the daily chart is actually a bullish impulse leg that projects to 1296.75.  The midpoint Hidden Pivot resistance associated with that number lies at 1278.25, and we should infer that a close above it would make a follow-through to the target an odds-on bet.  More immediately, because the pullback from Friday's very nasty bull-trap high offers no particularly promising spots for bottom-fishing., I'll suggest looking for a camouflage opportunities based on ABC rallies on the one-minute chart.  We're zooming down all the way here because, as of around 9:13 p.m. Sunday night, I could find no camo opportunities on the two-minute chart.

[Our friend and frequent contributor Douglas Behnfield thinks too many investment advisors are looking for the same thing in 2012:  rising stock and commodity prices, a weak dollar, rising interest rates and a bottom in the housing market. They’ll be wrong on all counts, he says. Instead, the enviable winning streak of those holding Treasury debt will continue.  A financial advisor and senior vice-president at UBS in Boulder, Colorado, he sent the following New Year’s message to clients last week. RA] 2011 was a confusing year from start to finish on Wall Street and the arrival of 2012 is not offering much relief. Today the popular message is that the economy is getting better in the U.S. and problems abroad can be overcome. Recession has been avoided and “escape velocity” will be achieved in the second half. Our economy can “decouple” from Europe and some of the big developing nations that have seen their economies slow such as China, India and Russia, now that they have run into trouble. Most economists and stock market strategists seem to have cut and pasted their 2011 forecast into their 2012 forecast. (How is that for the pot calling the kettle black?) But the concerns that clouded the outlook a year ago only seem to have gotten deeper. The positive messaging is focused on the following: The politicians will kick the can down the road and therefore avoid the kind of austerity that could derail the recovery. The Fed will engage in more quantitative easing (a euphemism for money-printing) if the economy or the stock market falters. Interest rates and inflation have nowhere to go but up, so the least attractive place to put your money is in the bond market. That is, unless you keep the maturities short and stick with “spread product”