Wednesday, January 18, 2012

We'll use the 31.545 target of the pattern shown as a minimum upside objective for now, predicated on a close or decisive thrust above the pattern's 30.485 midpoint pivot. Night owls looking for a 'camo' entry opportunity should check out the following, incomplete pattern on the 10-minute chart: A=30.070 at 11:20 p.m. EST; B=30.255 at 12:10 a.m.; and C=?.

A close look at the Dow Industrials in today's touts holds bullish implications for gold.  Check out the chart of the former if you remain to be persuaded, against all logic, that stocks are headed significantly higher.

Since gold has been moving in lock-step with stocks, this evening's very bullish tout for the Dow Industrials implies that bullion quotes are likely to continue along the bullish path begun from 1524 on December 29. Accordingly, we should continue to favor the 1681.50 target given here yesterday as a minimum upside objective for the near term. If that number is achieved, bulls should take encouragement, since it would complete a minor rally pattern above the important midpoint pivot of the four-month-old correction, effectively transforming a major resistance into a presumptive support.

Take any dozen good reasons for being bearish right now and they still don't equal the bullishness of the chart shown. The undeniably compelling rally objective is 13085, a 4.8% move from current levels, and one can only surmise that the dusting the 12158 midpoint received on the last pullback (12/28) all but clinched a finishing stroke to the higher number. Moreover, it implies that bears shouldn't get their hopes too high even if, in the next few days, the Dow plummets 324 points to retest the midpoint support. As of now, that would signal not weakness, but a screaming opportunity to get long.  Hard to believe, really, but that's what the charts say.  _______ UPDATE (March 6, 12:06 a.m.):  The Dow got as high as 13056 -- close enough to the target to turn me very cautious.  This means, for one, that I am not taking the likelihood of yet one more short-squeeze rally as a given.  In fact, a downdraft that exceeds 12883 would create the strongest bearish impulse leg on the daily chart that we've seen in a while.

Although the stock market is unlikely to grind to a complete halt, it seems to be experiencing what could be called nervous paralysis. Yesterday, for instance, achieving a modest rally target at 1316.75 that we’ve been using for the E-Mini S&P should have been a piece of cake. In fact, buyers were unable to push the futures above 1302.50 before retreating into the close.  This tedious undulation has repeated itself perhaps a dozen times since Christmas, and although stocks have trended timidly higher over that period, the total gain has amounted to no more than about 220 points for the Dow Industrials. Because there is evidently not much conviction among bulls, let alone a good reason to be bullish; and because bears have yet to recover from the trauma of the Dow’s 260-point short-squeeze on January 3, stocks have drifted nervously higher, unable to correct for reasons explained here yesterday. Those reasons mainly concerned the gusher of funny money that the central banks have channeled into the financial system. This is inflation, pure and simple, and although it provides a plausible rationale for buying stocks, we have our doubts that the stock market will ultimately prove to be the best investment vehicle for discounting inflation. Why?  Simply because inflation could play out as an instantaneously ruinous hyperinflation before subsiding just as quickly into a deflation far more destructive than the one we are now experiencing. Waiting for News In the meantime, it seems clear that the mountebanks who maneuver the markets up and down from one day to the next are waiting for the kind of news that will ease their task. Stories concerning Europe’s slow-motion collapse have been temporarily pushed beneath-the-fold by Europe’s seaborne disaster off Italy, but they are certain to re-emerge with a vengeance, and soon. It