Wednesday, October 1, 2014

Today's tout for December Gold looks at the big picture, with particular attention to two extremely important price levels not far below. My hunch is that a test of higher threshold -- multiple lows near 1180 that stretch back to June 2013 -- is inevitable.  I'd also say that odds of a successful test are poor.  However, and as I have tried to make clear in the tout, this would not necessarily spell yet more years in purgatory for bulls. Check out the chart accompanying the tout for a quick summary of what needs to happen to catapult Comex futures into a rejuvenated new bull market. (And if you don't subscribe, click here for a free trial that will allow you to access this material, along with the chat room and all other Rick's Picks features.)

December Gold is primed to test a double bottom near 1180 that has produced only weak rallies since the first was recorded about 15 months ago. Odds are not good that the ostensible support will hold, but neither is it farfetched to think that a fake-out breach of the low might give way to a rejuvenated bull market that stretches back more than a decade. This, then, is what we should look for now: a running of stops just below 1180, followed by an all-but inevitable bounce higher.  My hunch is that if that bounce achieves 1325 without pausing for breath, it will be the real McCoy. Notice, however, that any downdraft that exceeds the 'external' low at 1155.60 recorded in July of 2010 would be bad news for bulls, since it would refresh the bearish impulsiveness of the weekly chart.  These numbers will not be exact because this is a composite chart that blends many monthly contracts. But the numbers should be close enough for us to gauge the incipient strength of any selling. _______ UPDATE (October 3, 11:03 a.m. EDT): Several in the chat room recalled an old target at 1198.40. It worked briefly and very precisely for bottom-fishing, promoting a $5 bounce, but the fact that it was subsequently demolished was warning of how weak this vehicle remains. My minimum downside target is still the 1126.05 pivot that I tweeted, Stock-Twitted, talked about during the Wednesday tutorial session, and posted in here the other day. _______ UPDATE (October 6, 2:43 a.m. EDT): The futures have rallied after dipping just beneath the 1285.00 low recorded back in December, but the bounce so far is feeble, suggesting the futures are about to plumb new depths.  Alternatively, it would take a print today or tomorrow at 1211.10 to resuscitate the

The 171.10 rally target we used for this vehicle yesterday caught the intraday high precisely to-the-tick. This allowed subscribers to buy Oct 10 169 puts as suggested for a reported 0.75, the low of the day. Toward the end of the session, with DIA trading significantly lower, I suggested spreading off the risk by offering four October 10 167 puts short for 0.60.  The order went unfilled (although some tightwad put up a 0.59 bid in the closing seconds). Now, I'll suggest offering the calls short for 0.80, a price that I might suggest raising if it looks like stocks are going to open with a big thud. If the order were to fill at 0.80, our vertical-spread position would produce a gain of at least $20 no matter what, but with upside potential to $880. My reasoning behind this strategy is that the Ebola scare may already have reached the threshold of "tradable event."  This I have surmised from the rapt attention the story commanded at my gym, which has TV monitors in all of the workout rooms. Whatever happens, we can only pray that there has been no spread of the disease by the man now under close watch in a Dallas hospital. However, because the possibilities that might arise from this developing story are almost too scary to imagine, we should treat it as an event that could have a significant impact on financial markets. _______ UPDATE (At the opening): Bring the offer down to the original 0.60 for the short puts. _______ UPDATE (9:59 a.m.):  No trades recorded yet, but with the puts now 0.93 bid/1.07 asked, I'll score this as a short sale at 0.80 unless I hear from someone in the chat room who did worse.