News of November’s record-breaking trade deficit sent the dollar tumbling yesterday, but don’t be surprised if investors take leave of their senses soon again and the dollar resumes its bear rally. Until Wednesday, the buck was having a pretty good year, actually, with a gain of nearly 5% against the euro.  It’s a dead-cat bounce, to be sure, but the cat was acting as though it was about to receive new life from dollar shorts grown increasingly nervous about being on the wrong side of easy money.

However, if a short-squeeze was indeed percolating, word of a record $60-billion trade deficit for the month of November put a lid on it, at least for the moment. This means that goldbugs who celebrated yesterday’s bounce in precious metals may have been somewhat premature. I’ve reproduced a chart of the Philadelphia Gold and Silver Index immediately below that shows why.  The XAU, which ended the day at 95.05, has a downside target at 86.46  -- about 10% below current levels -- that looks likely to be achieved.

(Click on image to enlarge)

Three Reasons

There are three reasons for this, all of which  derive from hidden-pivot rules. First, the A-B impulse leg that in December initiated the current bear cycle was clean and decisive, breaching two prior lows without an upward correction of more than a day.  The leg is shown in yellow and extends from 110.76 to 95.93. A second bearish sign is that the midpoint of the prospective C-D leg, 93.89, was breached without generating a discernible bounce. And third, stochastic lows made, respectively, in early December and early January correlate with descending price lows. This non-divergent pattern suggest the trend that produced it – i.e., the downtrend – will continue.

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Try It While It’s Still Free

Futures traders who haven’t tried the intraday bulletin launcher at Rick’s Picks should do so soon, since real-time S&P advice is not likely to remain free forever. In the Intraday Notes section, I’ve been putting out targets for the E-mini S&P. These pivots have generally been quite accurate and tradeable, but their usefulness would be diminished if too many of you were to use them. That is why I’m considering disseminating them by way of a chat group that would be limited to ten or fewer participants. If you’d care to comment, please do so via the suggestion box at the bottom of the Inside Page. It is accessible only to paid and trial subscribers.