Tuesday, September 18, 2012

Although gold has pulled back about $24 from its recent six-month high, it remains in a state of impulsiveness on the weekly chart since mid-August.  Last week's low of 1720.00 is the level to watch, as a move below there would give us a weekly 'C' point which would be sufficiently large in percentage terms to satisfy our sense of proportions.  The one-off 'A' is very strong, but the pattern would be more bullish if the late February high of 1800.90 is surpassed by the impulse wave before the BC retracement comes in.  The sustained bullishness deprives us of patterns that can project any farther down than the 1746 area for now, so if we get continued weakness, we'll have to watch the action on the lower timeframes for signs of a reversal.  The charts don't give us very definite upside targets, either.  This four-week uptrend has had at least three powerful rallies, and we might get another one before our weekly 'A' is in place.  Keep track of the pattern beginning with A=1720.00.  You'll want to be aware of where that pattern's 'X' point is.  (Posted by Doug “harry” McLagan)

We recently raised our forecast for the Dow Industrials to 14969, a target derived from Hidden Pivot Analysis that lies 10% above Friday’s close.  We note that it would take but a 4.2% leap from current levels to eclipse October 2007’s all-time high of 14198. Make no mistake, we are not bullish on the economy.  Far from it. Because the recently announced QE3 stimulus will do little or nothing to create jobs or strengthen America’s competitive position in the global economy, it can only end badly for investors. For better or worse, few of them actually remain, since the markets these days are too volatile to accommodate investing the old-fashioned way, with buy-and-hold strategies.  As a result, the action has come to be dominated almost entirely by technical traders whose edge lies in exploiting fleeting price discrepancies for instantaneous gain rather than in harnessing value for the long-term. They control vast sums of money, with leverage that is absolutely certain to lurch violently into reverse someday, causing the global financial system to implode. In the meantime, with last week’s announcement that the Fed will attempt yet another round of monetary stimulus via open-ended purchases of mortgage debt and Treasury paper, traders had little choice but to shift still more money from yield-less bonds into soaring shares.  We’ve characterized the stock market’s steep rise of late as a bull trap. By this, we mean to imply that the profits traders are currently reaping by staying in stocks are destined to vanish in a trice. Some would argue that it is impossible for stocks to collapse at a time when monetary easing has never been more promiscuous.  While this may be true for the moment, at least in theory, in practice the good times on Wall Street could end overnight. Recall that