Thursday, March 1, 2012

Stocks and bullion have been moving synchronously for some time, so if you believe yesterday's downdraft on the latter is the end of the bull market, you also have to believe that it marked the end of the Mother of All Bear Rallies in stocks as well.  Whatever you believe, be sure to check out this morning's touts for the E-Mini S&Ps and Gold, since they address the technical side of the question.

If you're having trouble believing that yesterday's panic out of bullion was no more than a garden-variety shakedown, then try to imagine that stocks, which also fell yesterday and which have been moving in tandem with precious metals, are doomed as well because of whatever it was Bernanke was blathering/lying about in his testimony before Congress. Does anyone actually believe that the Mother of All Bear Rallies is over simply because officialdom has chosen not to acknowledge that the money faucet is wide open despite their being no official declaration of QE3?  That's what I thought. From a technical standpoint, yesterday's selloff was  only weakly impulsive on the hourly chart.  And now there's a bounce, that  is continuing at press time. Because it comes from a 1356.75 low that fully 1.00 point beneath a Hidden Pivot 'D' support (A=1377.25), we shouldn't expect the rally to rocket to new recovery highs straightaway.  Camouflageurs can nonetheless look for a handhold on the lesser charts if and when the futures appear to consolidate above the 1362.25 midpoint pivot shown.  There'll be plenty of upside left, since the 1390.00 rally target broached here earlier remains valid. Would you like to learn how we use the ‘camouflage’ trading technique to significantly reduce entry risk? Click here for details

The chart shows what we should expect in the days ahead if yesterday's very nasty selloff in gold is to prove to have been no more than a shakedown.   As many of you will already know, healthy bull markets tend to produce corrective ABC patterns that do not reach their 'D' targets.  I've sketched this hypothetically in the accompanying chart, and if actual price action in the days ahead looks like what I've shown, it would be reason to buy gold aggressively at p. Until then, we'll watch rather than speculate, since price action alone can tell us all we need to know.

Although yesterday’s Congressional testimony by “Helicopter Ben” Bernanke was fundamentally meaningless, it caused gold and silver prices to take a spectacular dive. They got hit after the ‘Nank, prevaricating as usual, said the central bank wasn’t rushing to crank up a QE3 stimulus.  While this may be true as far as it goes, it belies the fact that the money spigots have been wide open for years and will remain so, probably, until the financial system collapses. More on that below.  Concerning the savaging that precious metals received, they are all but certain to recover, since the forces that have been driving them steeply higher for more than a decade are still very much in place. Even so, it could take at least a few weeks for gold to build a new base for a shot at $2000, and silver for a push into the mid-$40s. In the throes of yesterday’s brutal, deftly engineered shakeout, Comex gold dropped $104, or nearly six percent, in just a few hours. The April contract hit an intraday low of $1688 after trading as high as $1793 the day before. As for Silver futures, they suffered their worst single-day loss since September, falling $3.76, or 10 percent, from intraday high to low. Mining stocks fell in sympathy, lopping three percent from the value of the Gold Bugs Index (HUI) and five percent from GDX, an index that tracks the shares of junior miners. Although Silver futures fell harder than gold in percentages terms, the technical damage was worse in the latter. Notice in the chart above that April Gold’s plunge exceeded two prior lows on the daily chart. This created a bearish “impulse leg” of daily-chart degree, according to our proprietary Hidden Pivot Method of analysis, and it is the worst such damage we’ve