Bullion quotes finished off their lows yesterday, but not before wreaking technical damage that portends at least somewhat lower prices. We scratched a trade in the February mini-gold contract after buying precisely at a bottom that produced the day’s best bounce, albeit one that lasted for only an hour.  The subsequent intraday low was at 421.20, but I expect it to be exceeded this morning by at least a point. If so, the bottom could very conceivably coincide with downside targets I’ve furnished, respectively, for the Amex Gold Bugs Index and Newmont Mining. Both are precious-metals bellwethers, so today’s action could be crucial to the outlook for mining shares for the next 3-4 weeks or longer. A two-day close below 419.40, basis Comex March gold, would be a blunt warning of a possibly lengthy correction down into  the range 405-415. Similarly, if the HUI trounces a hidden-pivot support at 198.84, it would open the chute to as low as 184.65.

With respect to the broad averages, moderate buoyancy returned yesterday after a shaky start in the first three sessions of the year. Both the Dow and the S&P have been edging toward the support of multiple lows made in November and December. The lows lie roughly 1.5% below current levels, but my hunch is that they will be breached before bulls regain the upper hand. However, a small show of strength today and tomorrow could bring about a significant change, stochastically speaking. As the chart below shows, the S&P 500 is extremely oversold and seemingly eager to turn higher. If they get the chance, stocks could have a strong tailwind behind them by Friday’s close.

(Click on image to enlarge)