Monday, March 26, 2012

I've established a 200-share tracking position following last week's dramatic low within three cents of a 23.93 correction target that had been flagged here earlier. Our effective costs basis has been lowered to 23.79 after we exited half of the position for a small paper gain. Because the threat of a relapse still exists, use a stop-loss a 24.12 stop-loss for now. (That's where the lesser intraday charts would turn bearishly impulsive.)  Keep in mind as well that a 22.74 downside target will remain viable in theory until such time as GDXJ rallies above 27.33. If GDXJ were to fall to 22.74, we would become very aggressive buyers.  Meanwhile, it would take a mere 25.46 to turn the hourly chart decisively bullish.

The corrective pattern shown is pure sausage -- not to mention, head-and-shoulders perfection -- but I will offer a projection nonetheless since, sometimes, even the very obvious can pan out as 'everyone' expects.  The 'D' target at 78.965 appears likely to be achieved, since, as you can see, its 'p' sibling at 79.580 has gotten trounced.

Touts for Monday have placed the burden of proof squarely with the bulls in gold and silver, so check 'em out if you want to know exactly what it will take.  With regard to index futures, the notion of shorting 'The' top, or even 'a' top has  succumbed to the tedium of a weeks-long failure efforts to reach an ostensibly modest Hidden Pivot target.

The week ended on an encouraging note for bullion investors, but can we trust this rally? Only with caution. Our hunch is that it was a false start and that precious-metal futures and mining stocks will re-test their recent lows.  This puts in doubt a profitable long position we’d recommended  in GDXJ, the Junior Gold Miner ETF.  Our suggested entry point at 23.93 was hit on Thursday, three cents from the low. The number is a “Hidden Pivot support” that we’d disseminated to subscribers when GDXJ was trading above $26. We’d like to think the trade will work out beautifully, meaning an eventual doubler to $50 a share. Even so, we’ve already taken a precautionary step by closing out half of the initial position on the very small paper gain that existed prior to yesterday’s rally. Although we’ve characterized our short-term bearish outlook as a “hunch,” it is buttressed by technical reasoning.  What concerns us most is the heavy look of bullion-sector charts even after Friday’s rally. Indeed, there is such clarity in the larger, downtrending patterns on these charts that their respective downside targets look almost magnetic.  You can see this in the GDXJ chart above – and you don’t need to be a graduate of the Hidden Pivot Course to sense the earnestness of the selling. The ABC price points established a bearish Hidden Pivot target at 22.74 that lies $1.16 beneath the low where subscribers were advised to get on board. Notice as well that the upper red line – what we call a “midpoint support” – appears to have mutated into resistance. Not Goldman Sachs Now, if this were a stock that we love to hate -- Goldman Sachs springs to mind -- we’d probably tell subscribers to reverse their long positions and go short near

We shouldn't allow ourselves to be seduced by Friday's rally, since the larger downtrend had crushed a Hidden Pivot midpoint support at 31.680 with ease a day earlier (see inset).  Camouflageurs can attempt to get short near 33.385, the lower green line where a short to 30.270 was initially signaled. However, the hourly chart would swing back to bullish if buyers can push this vehicle above 32.495 today. The importance of that number is also shown in the chart.

Two weeks of range-trading have sapped my enthusiasm for trying to get short at a potentially important top.  Last week's high fell nearly five points short of the 1412.75 Hidden Pivot I'd had in mind, and the duel between bulls and bears since has been too feeble to care about. To be sure, bears held a small edge when trading drew to a close last week.  But bulls could parry with a mere 5-point rally that would even things up.   The chart shows what this would imply, but also a potential 'camouflage' opportunity from the long side for nimble pivoteers.