Wednesday, March 14, 2012

The gold price impulsed down after the Fed policy announcement on Tuesday, confirming targets at 1653.00 and 1588.50.  The low of the day narrowly surpassed the low made a week earlier and slightly deepened the decline that has been in progress for two weeks.  After rebounding, the futures have fallen enough to confirm a new, smaller pattern whose midpoint is so close to "B" as to be useless to us, but its "D" target is at 1641.90 and looks like a long-side opportunity.  A buy order at 1642.10 with a stop at 1641.40 would risk $70 plus commissions.  If gold can get down to the area just below $1600, it will encounter strong support.  In addition to the 1588.50 target shown on the attached chart, the midpoint of a large pattern beginning at gold's all-time high comes in at 1593.30, and the long-term trendline going back to 2008 is at about $1580 right now.  (Posted by Doug "harry" McLagan) _______ UPDATE (2:45 p.m.): The futures bounced almost eight dollars from just above the 1653.00 midpoint, but after resuming the downtrend sliced through our order-pair around the 1641.90 pivot.  Although gold is becoming very oversold in the short term, the chart structure seems to be pointing toward our 1588.50 target.

The intraday charts are bearishly impulsive going back to the narrow failure of  early February's 30.55 high to surpass a key external peak at 30.76 recorded on December 2. However, if GDXJ continues lower it will have an opportunity to decisively change direction at 25.63, a compelling midpoint support shown in the chart. 'Camo' bottom-fishing is advised there, but if you simply put up a bid, I'd recommend an initial stop-loss no wider than 0.07 points _______ UPDATE (12:46 p.m. EST): Sellers crushed the midpoint support on the opening bar, implying that the lower target shown in the chart, 23.93, is now an odds-on bet to be achieved. Would you like to learn how we use the ‘camouflage’ trading technique to significantly reduce entry risk? Click here for details.

Could something as meaningless a 'successful' stress test for large U.S. banks have been the cause of yesterday's short-squeeze rally? If so, Wall Street would seem to have overlooked the fact that the biggest bank of them all, the Federal Reserve, is still sitting on $2 trillion worth of bad mortgage paper.  Scant consolation for bears, I know, but one of these days....

The bearish target at 31.230 (see inset) will become our minimum downside objective if and when its p sibling at 32.835 fails as support.  The latter number will nonetheless be an appealing place for aggressive bottom-fishing, provided traders can limit entry risk per contract to no more than $70  theoretical. 

Yesterday's nasty short squeeze fell 5 points shy of a minor, 1403.50 target, favoring yet a little more upside progress Tuesday night. This would offer a scalp-trade opportunity at best for night owls, since immediate prospects appear to be somewhat limited. If the futures should effortlessly surpass the 1403.50 Hidden Pivot, however, the 1419.75 'D' target of a pattern of greater degree (see inset) would be in play -- would be an odds-on bet, actually, since its 1379.25 midpoint sibling was obliterated by yesterday's take-no-prisoners charge.

[We recently asked our friend Mario Cavolo, a frequent contributor to the Rick’s Picks forum, what it’s like from a cost-of-living standpoint to live in Shanghai. A New York City expatriate who lives and works in Shanghai himself as an entrepreneur, author, TV and radio personality, he graciously obliged with the guest commentary below. The fictitious diary is that of a middle-manager, Mr. Wang, who, like many of us in the U.S., struggles to make ends meet. RA] In this piece, we shall spend an imaginary and obviously unrealistic day in the life of a typical middle-class man living an ordinary life in Shanghai.  In the process, we shall come to better understand the typical costs associated with middle-class family life in today’s China.   Our “average Joe” is Mr. Wang, 30 years old, a white collar worker who might be an engineer, architect, human resources administrator or account manager. He is a middle-class professional who works for a large Chinese or multinational company, earning a salary of perhaps 4000-8000 renminbi ($670-$1340) per month plus a nice benefit package, and living “in the city” with his wife and brother. Note as well that if the Wang family lived in a secondary city such as Chengdu, Shenyang, Changchun and dozens of others, the local costs and prices noted would range 20% to 40% lower. For example, a taxi in Shanghai starts at 14rmb/$2.20, while in Shenyang they start at 8rmb/$1.40. Similar local apartment rents in a second-tier city are quite low, at 1500-2500rmb ($275-$450)/month for a 2-3 bedroom unit. Mr. Wang’s Rough Morning Sunrise greets our day once again, leading us out the door at 8 am. from Wang’s 900 square-foot, three-bedroom, fourth-floor walk-up which rents for 3000rmb/$500 per month. Mind you, that is pretty cheap, but only because Mr. Wang does