Friday, October 10, 2014

December Gold's daily chart swung bullishly impulsive yesterday, the first time this has occurred since June. The implied power of the rally would increase significantly if the futures can now exceed the peaks labeled #3 and #4 (see inset) without an intervening b-c correction. Meanwhile, night owls can try bottom-fishing the correction from Thursday's high with a 1218.80 bid and the tightest stop you can abide.  On the 5-minute chart, the relevant pattern began with a=1230.30 at 10:40 a.m. EDT.

Nothing like a 335-point plunge in the Dow to break the tedium of 200-point daily swings that were starting to seem routine. This may or may not be the start of the Mother of All Bear Markets.  If it is, though, the silver lining is that a 12,000-point plunge in the Dow would probably cure America of its dependency on feather merchants, mountebanks, bad wizards and paper shufflers. All of them have had a big stake in pretending we could borrow our way back to prosperity.  Funny how they are the only ones who have truly prospered, even as the Great Recession continues to suck the marrow from the nation's middle class. At Dow 4000, rectification might conceivably include show trials, public floggings and recantations, and sundry other delights for the masses.  Then again, maybe the Dow is about to reverse with a vengeance, ushering in yet a few more years of business as usual.

In after-hours trading the futures were inching toward the 1896.75 target shown (see inset; this Hidden Pivot support was broached in the chat room yesterday with the December contract trading around 1926.). The Dow would have been down nearly 600 points if the target had been hit by the bell, and although this threshold seems very likely to be achieved, bulls may argue in retrospect that it could have been worse, that the pain was at least spread over two days.  I expect a tradable bounce precisely from the target, but if it fails to materialize and the selling snowballs, we'll see a minimum 1874.75 before buyers can attempt to levitate this brick with any hope of success. Although it's not yet possible to assert that the Mother of All Bear Markets has begun, it's worth recalling that some first-rate technicians quoted here a few weeks ago said as much. The boldest and clearest pronouncement of all came from Bob Prechter's Elliott Wave Theorist: "Next week, the U.S. stock averages should begin their biggest decline ever." So far, so good -- good, that is, if you believe that only the most devastating bear market imaginable is capable of purging the financial system of the lies and epic folly that have sustained it for decades. It won't be pretty, but how else is America ever going to return to honest business?