Wednesday, March 7, 2012

A 31.950 correction target is equivalent to the one at 1623.40 that we're using for April Gold. Not far below it is an 'external' low at 31.600 that we should not want to see broken if Silver is to come roaring back. The best outcome, in fact, would be an upturn from somewhere above 31.950 -- the further above it, the better. Camouflageurs should look for the turn -- and trade it if the opportunity presents itself -- anywhere from 31.990 on down.

Early Tuesday night, April Gold was in a shallow distribution just beneath the 1675.50 midpoint support flagged in yesterday's tout. This is bearish, of course, and if the selling should snowball toward exhaustion, it would imply more downside to 1623.40, the midpoint's 'D' sibling. Note the four external lows, as yet unbreached, that were recorded in January.  If only the first is exceeded to the downside, it would significantly shorten the already good odds of 1623.40 being reached.

Sellers tore through every minor Hidden  Pivot support one could find yesterday, pausing at last above a series of key structural supports in the 1330s created a month ago (see inset).  We'll be better able to gauge whether this is corrective or impulsive when we've seen how the supports handle the downtrend. Until then, trading this vehicle will be catch-as-catch-can.  Night owls will find plenty of "camouflage" cover on the 5-minute chart. Note especially the 1344.25 peak recorded just after noon on Tuesday -- a bullish breakout point for us that few others will notice or care about.

We hold two June 40 calls with a 1.17 cost basis after imputing to them a partial profit taken on two more at 1.37.  Use a 1.17 stop-loss for the two that remain (or multiple thereof), but make the order one-cancels-the-other with an offer to short two June 42 calls for 1.47, good-till-canceled.  If successful, we'll hold two vertical spreads for a net credit of $30 each.  In theory, that means the worst we could do on the trade after commissions is make about $40; and the best, if SLW is trading above 40 come June expiration, is make $460. The stock's immediate fate is not predictable, at least by me, but it'll need to hit 36.41 for bulls to regain control. Otherwise, SLW will remain vulnerable to more slippage down to as low as 33.44. ______ UPDATE (2:29 p.m. EST):  Lower the short offer for two June 42 calls (or multiple thereof)  to 1.17 or better, good through Friday.  Would you like to learn how we use the ‘camouflage’ trading technique to significantly reduce entry risk? Click here for details.

Like a breath of spring, wasn’t it?  Just when we were expecting yet another short-squeeze toward Dow 14000 and beyond, the Indoos plummet a refreshing 203 points, bowing to economic realities and rationality at last. Or was it just March madness? Who cares. When some uncharacteristically glum Wall Street wrap-ups hit the tape late Tuesday afternoon to acknowledge the stock market’s steepest decline of the  year, it were as though we’d died and gone to heaven. It was even better than that, actually, since the selloff did not exactly take us by surprise. A trading “tout” that we first aired in mid-January called for a 600-point Dow rally to 13085, but here’s the timely update that went out to subscribers shortly after midnight Tuesday:  “The Dow [has gotten] as high as 13056 — close enough to the target to turn us very cautious.  This means, for one, that we are 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.” In the actual event, the Dow blew past 12883 on its way to an intraday low at 12734. So how bearish are we?  Not as bearish as you might think, actually -- just very cautious, as noted above. We leave bullish and bearish “feelings” to gurus who possess, um, crystal balls. We don’t purport to see the future – only to trade day-to-day realities that can change so fast that if you stop to pat yourself on the back after making a good trade or prediction, you risk getting flattened by Mr Market’s equivalent of an 18-wheeler. But as long as you don’t take your eye off the truck, there is nothing to