Wednesday, December 12, 2012

I've reproduced the 240-minute chart because it provides a clear perspective for seeing what must happen for Gold to become interesting. Very simply, the February contract must traverse the gap between the two labeled peaks without a B-C correction.  It can chop around as much as it wants in the meantime, but once it gets above peak #1 (1718.80, aka "the starting line"), it will have to continue up to 1725.00 without pausing for breath. If the impulse leg, still unpaused, were to exceed a third peak at 1733.70 recorded on 11/30, that would all but clinch a run-up to $1800.  I've set screen alerts at these thresholds -- and so should you if you don't want to get stressed over mere noise. _______ UPDATE (2:37 p.m. EST):  Today's spasms exceeded peak #2, but it took a pullback and a running start after peak #1 was exceeded to accomplish this. The pullback does not show up as a true B-C correction on the 240-minute chart, but I'm inclined to downgrade the imputed power of the thrust because of the way it looks on the hourly chart.esult, on the 240-minute chart. Looking ahead, we'll set a new bar that will require the futures to create a new impulse leg with a 'B' top exceeding November 30's 1733.70.

Subscribers should be holding four January 128 puts purchased for 1.00. (Some of you reported paying as little as 0.94, but it is our custom to use the worst price paid by a subscriber.) Our goal now, assuming DIA falls, will be to short puts of a lower strike for at least as much as we paid for the ones we hold.  If successful, we will have legged into a vertical bear put spread at no cost or a net credit, eliminating the possibility of loss. For now, be prepared to stop yourself out if the option falls to 0.70. The chart shows how yesterday's top closely coincided with a Hidden Pivot target that I'd deliberately ignored in choosing to use the 'one-off' A (labeled A2) instead of the more obvious one (A). It is mildly bullish that DIA slightly exceeded A=132.96, but I am suggesting nonetheless that you stick with the puts, using a 0.70 stop-loss, because I still like the trade. The stop-loss is necessary, at least for the time being, because it would be quite bullish if DIA pushes above such a clear target within a day or two of its being hit. The pattern itself took nearly a month to play out, after all, and that is why its 'D' target should be expected to show some tradable stopping power.

Stocks have ralled this week on the prospect of a budget deal, but don’t expect them to get very far. With a modest surge in the broad averages, investors appear to have upped their bet that Obama and his heartfelt enemies in Congress will agree to do what we have confidently expected them to do all along – i.e., kick the can down the road. No one will be surprised, since kicking the can down the road is what politicians do when they are not in recess, campaigning or buggering their clerks. Unfortunately for us all, the much-kicked can will still be lying there when 2013 begins, fueling worries about what this implies for the U.S. economy in 2013. The good news, such as it is, is that Obama’s “filthy rich” – mainly small-time entrepreneurs who toil 70 hours a week to net a princely $130,000 after taxes  – will get a temporary reprieve from 39% marginal rates.  The dollar will be spared too, at least for a while, since Obama will not be given the ruinous power to raise the debt ceiling without consulting Congress. And the military pork-barrel that feeds so many cities and towns will remain alive and well, albeit temporarily, since a $500 billion sequestration of defense funds will not automatically take effect. What will remain once the can has been kicked yet again is an economy that is probably already in recession, a housing market nearing the end of its dead-cat bounce, and a consumer hangover from the recent binge in, among other things, automobile purchases.  (This just in: A hitherto unnoticed provision in Obamacare will charge each and every insured person an extra $63 each to cushion the cost of covering people with pre-existing conditions.  This works out to tens of millions of dollars