Thursday, September 27, 2012

Hidden Pivot analysis tells us to expect lower crude oil prices, but the market might need to work off an oversold condition first.  On Wednesday the futures broke through the midpoint of a very elegant pattern which began at A=99.81.  We take this as a signal that the 'D' target of 84.99 is in play, but two things should give us pause: the pattern has unfolded quickly, and its BC retracement was only 33%.  There is another important pivot to bear in mind, the midpoint of a much larger pattern with A=107.15, yielding a midpoint at 86.57.  Both of our downside targets are below strong support in the area of two prominent prior lows around 87.50.  A tightly-stopped buy of the 84.99 pivot is not recommended, due to its proximity to the round $85 number and to its proximity to an important prior low at 84.91.  If the oil price continues to move up from here, we'll want to take a fresh look at the charts and view yesterday's low as a 'B' point.  (Posted by Doug “harry” McLagan)

On Wednesday the gold futures declined enough to produce the largest pullback of the recent strong uptrend, but we still don't have enough of a BC leg to work with.  The 26% decline from the $1790 high and the subsequent $24 rally, which is extending in the early morning hours of Thursday, raises the question whether the large impulse wave will make new highs.  The alternative is a lower low and a large pattern that we can take seriously.  The impulse would retrace by about a third with a decline to $1724.  Yesterday's sharp drop, which was underway when the trading pit opened at 8:20 a.m., produced a "wall" from 1763.50 on down.  The recovery has thus far narrowly missed that prior high (at 1763.50), visible on the 5-minute chart.  Nonetheless, most of the decline has already been retraced, which means that the powerful move has been almost neutralized in Hidden Pivot terms.  If the current session high of 1762.50 holds, we should keep an eye on the targets associated with A=1768.40, namely a midpoint at 1747.60 and a 'D' target at 1732.40.  If the uptrend continues, look for resistance at the midpoint of a larger pattern at 1773.30, as depicted on the attached chart.  The pattern's 'D' target at 1808.30 is not a place to sell or to sell short, as it is only slightly above the higher of two major prior highs going back to last year.  (Posted by Doug “harry” McLagan)