Wednesday, June 18, 2014

Based on subscriber fills reported in the chat room last week, I'm tracking two short contracts with a 1954.00 cost basis that imputes profits taken on two additional contracts that were exited earlier.  A stop-loss at 1939.75 is in place, but I'm going to suggest raising it to 1951.25, four points above the all-time high, so that we don't get stopped out of a potential four-bagger trade by a middling short-squeeze.  _______ UPDATE (June 20, 1:51 a.m. ET): We exited on the stop-loss for a small profit. I've provided the location of the next short-able pivot to each and every subscriber who requested it by email, but as noted earlier, I will not divulge it publicly because that might compromise its value for our purposes.

August Gold's daily chart is in a very clear downtrend that projects to 1221.20 (see inset). What gives the bearish pattern its authority and presumed precise reliability is the 'legitimacy' of the 1240.20 'B' low on 6/3. It lies three ticks beneath a key external low recorded on January 31, and is therefore not 'sausage'. The tradable implication is that you can bottom-fish the 1253.10 midpoint support with a very tight (i.e., perhaps four- or five-tick) stop-loss. However, if it's hit, a further fall to the 1221.20 target should be regarded as likely.  Please note that the foregoing would be invalidated if the futures can rally above 1285.10, the point C of the pattern.

I commented here yesterday on the feebleness of Monday’s short-squeeze, but yesterday’s rally was just as lame. The paradox in this kind of price action is that it can feed on itself, sucking in more and more bears who can’t resist shorting into the stock market’s tedious grind higher. Then, before they realize they’ve trapped themselves, a piece of ostensibly good news hits the tape and the short-covering panic begins. In this case, nearly all of the news has been bad, but not so bad as it seemed at the end of last week, when Baghdad seemed ready to fall to jihadi savages. Now it looks like the madmen may be headed into a disaster of their own, confronted by well-armed Shiite resistance not only from within Iraq, but by Iranian troops summoned by Maliki. This qualifies as good news, since it implies jihadists will be killing each other, with the U.S. able to either watch from the sidelines or limit its involvement to air strikes and drones. Toss in bullish employment figures on Friday, and the stock market could be bounding blithely higher as usual, for no good reason. We’ll be better able to predict what’s ahead when we’ve seen the Dow head-butt a ‘Hidden Pivot’ target with the potential to stop the rally cold. Click here for a ringside seat and a free trial subscription to Rick’s Picks. No credit card necessary.