Friday, February 22, 2013

Yesterday's swoon in the Dow created a bearish impulse leg on the hourly chart that looks stronger than the usual upsy-daisy price action. For a closer look, check out the new chart posted as an update to the DJIA tout.

We are still looking to get long, and the subtle 'external' peak at 1594.50 shown in the chart could provide the means to do so via camouflage.  This trade set-up will work best if the rally to that peak is labored and choppy. If it is strong and easy, however, and therefore enticing to the herd, you should be prepared to initiate the trade via a buy-stop that comes up quickly. Ideally, the required b-c pullback will have come from within the range  1594.60-1595.10. I've sketched this out so that you can see exactly what kind of pattern will produce the best odds for us. _____ UPDATE (February 26, 2:48 a.m. EST): The pattern played out more or less as drawn, but entering on the 1594.50 'x' signal took us only to the 1597.00 midpoint and a partial profit before things turned south. The failure of this minor ABCD pattern to reach its D target (see new chart) suggests more weakness ahead, so traders should be especially cautious if positioning from the long side.

[Update: Comex April Gold bounced $30 on Thursday after making a marginal new low at 1554.30.  Bulls are not yet out of the woods, but they should take encouragement from this bear-trap price action. If the short-squeeze does persist for a second day, generating a weekly close above 1594.50, bulls will be back in business if not yet back in the driver's seat. RA] Is it Katie-bar-the-door-time in gold?  We seriously doubt it, although we wouldn’t blame bulls for feeling despondent after yesterday’s sharp decline, the second in a week. The April Comex contract plummeted to an intraday low of 1558 on Wednesday before reflexive buying provided a modest bounce in after-hours trading.  The good news is that the low was pretty close to a trendline that just about every gold trader on earth must have been watching. With such a devoted following, it’s hardly surprising that this technical support was breached marginally, presumably to put the fear of the lord in wanton speculators. But there are some troubling facts as well. For one, considering how many bulls probably got stopped out when the trendline was penetrated, the futures should have shown more pluck on the rebound. This is just simple physics, since, once gold’s fair-weather friends and perhaps more than a few true believers had been shaken loose, profit-taking on the subsequent rally should have been greatly reduced, lightening the ascent. Oh well. Perhaps spirited bargain-hunting will commence on Thursday, driving gold back above $1600 and out of the danger zone. Reason for Caution Even if that were to occur, however, there would still be reason for caution. That’s because at $1558 the futures were trading $12 beneath a Hidden Pivot correction target we disseminated to subscribers a while back. It kept us on the right side of the