Tuesday, May 22, 2012

The gold price has been bullishly impulsive since last week's 1526.70 low, and the charts leave us no choice but to wait for a pullback before we can assess where the metal is going next.  The rally so far has reached 1599.00, and it would take a decline of about $21 to give us a BC leg that we could work with.  If the rally continues without such a retracement, its ability to surpass one or both of the prominent prior highs of 1602.20 and 1609.00 will be telling.  If 1599.00 holds and the price drops as far as 1568.60, a bearish pattern beginning at 1648.00 will be activated, and we'll have a "D" target at 1477.70.  A print at 1562.60 would point as far down as 1453.40 (A=1672.30).  The bigger picture is made somewhat confusing by the ambiguity of last week's seemingly important low, inasmuch as the June and August futures surpassed the December 29 low, but the spot price, the "continuous" futures contract, and the December 2012 contract did not.  Bear in mind that by the end of July the December 2012 contract will become the "front" contract and will remain so for the next four months, given the way traders deprecate the October gold contract every year.  (Posted by Doug "harry" McLagan)

We hold a premium-rich strangle in the QQQs, but it will shed value quickly as the week wears on and traders realize June expiration, on the 15th day of the month, will be stealing up on them quickly. Of course, the slimming effect on the puts will be exacerbated if the broad averages continue to rally. Accordingly, I have recommended bailing out of the option position Tuesday morning. At Monday's closing prices, exit could have been achieved for a little more than we paid.

The stock has taken off without quite reaching my "ideal" pullback level.  Regardless, the chart shows a distinctive external peak that can be used to get long via camouflage.  This implies waiting for an entry signal following a pullback from just above 25.82.  I'd suggest using a "timed buy-stop" (as detailed in the webinar) to get aboard, since the second stage of the rally (aka 'c-d') is likely to unfold quickly following a breakout above 25.82.  Note:  We hold the June 40-42 call spread at no cost, going back months.

Bulls and bears were in a minor skirmish late Monday night, but we'll be better able to judge which is getting the better of the other by monitoring the midpoint Hidden Pivot support of the minor corrective pattern shown. An easy move through it would portend likely weakness, or at least softness, on Tuesday. Even so, camouflageurs should plan on bottom-fishing there, using the 3- or 5-minute chart to spot the first uptrending ABC uptrend that triggers a long entry meeting our criteria.

The futures have rallied energetically after bottoming at exactly 1287.25, the Hidden Pivot correction target flagged here Sunday night. Now, shortly before midnight, they've stalled enroute to a minor-rally target at 1319.25.  This number can be shorted by nimble Pivoteers, but it will probably be more valuable for assessing the strength of the trend.  Notice in the chart that, on May 17, there is one external peak below the 'D' target and one just above it. An unpaused move through all three resistance points (one of them, of course, "hidden") would be warning bears to step back for the time being. Traders should note that a 'b-c' pullback from just above either of the two external peaks could yield an excellent opportunity to get long via camouflage.  Calling the turns precisely and confidently is easier than you might think.  Want to learn how? Click here and get a $50 discount to the upcoming Hidden Pivot Webinar on June 6-7.

I’m in Gotham (photo below) for the annual spring dinner of the CMRE, the Committee for Monetary Research and Education.  The members come mostly from the financial community, although they are hardly what one would call Wall Street types.  More like libertarian firebrands, deeply committed to sound money, truth and accuracy in journalism, free enterprise and muscular capitalism.  Herewith, as promised, some  highlights from the CMRE's annual spring dinner, held recently at the Union League Club: Edwin Vieira Jr.:  Google this guy if you don’t know who he is.  A renowned Constitutional lawyer with a gift for oratory, he brings crowds to their feet. Economically and politically speaking, says Vieira, the stage has been set for a “catastrophic” event. The Fed, meanwhile, has usurped a degree of power that is unknown to America’s system of laws. But take heart, all ye who think a gold standard has only a remote chance of being re-instituted. In fact, says Vieira, under the provisions of Article 1, Section 10 of the Constitution, a growing number of U.S. states are opening the door to bullion as payment for private transactions.  On the (very) scary side, Vieira averred that an American firm has been awarded a contract by Homeland Security to provide 750 million rounds of .40 caliber hollow-point ammunition to the U.S. Army. This type of bullet is designed for just one purpose, warns Vieira: killing civilians. Paul Brodksy: a money manager with QB Asset Management, he says a U.S. hyperinflation would require only an edict from the Fed stating that, effective immediately, the new price of an ounce of gold will be $10,000. Devaluation is the only way out for an America drowning in debt, Brodsky asserts.  And don’t think it would hurt the banks; they would love it, he says, for they