Gold quotes plunged yesterday without having quite reached the $657 rally target I’d projected for the Comex June contract. The actual high was $649, representing an $8 shortfall. Usually, when a trend fails by this big a margin my outlook for the intermediate term (i.e., three to five weeks) will change to bearish. However, I have my doubts that so robust a bull as this one will abide such a lengthy correction. We’ll be better able to judge on Friday if the June futures interact with a hidden-pivot support not far below Thursday’s settlement price. The precise location of the pivot is given in the Touts section of Rick’s Picks, but suffice it to say, an overshoot as small as 80 cents would imply additional slippage of nearly 3% in the gold price. The hidden-pivot support looks sufficiently reliable to warrant some very tightly stopped bottom-fishing, so gold traders looking to re-enter on the long side with minimal risk should pay close heed to my number.

(Click on chart to enlarge)

I should also update my analysis for the Dow Industrials, since the blue chip average yesterday easily surpassed a bullish threshold at 10350 that I first flagged here months ago. I’d said at the time that that would be a potentially very bullish sign -- and so it is, at least on a purely mechanical basis. But I do mean purely mechanical. In that respect, I am keeping company with Richard Russell, a permabear who constructed a Primary Trend Index to keep himself honest. Like Russell, although I think the stock market stinks worse than buzzard droppings at these levels, I’m willing to hold my nose and go with the trend – or at least, not resist it -- so long as it remains bullish based on purely mechanical indicators. That said, I am nibbling at Fannie Mae puts at the moment and watching closely for the very first sign of a bearish reversal in the broad averages. That would imply the creation of a negative impulse leg on the one-minute chart. However, to avoid a whipsaw, let me simply stipulate that the downtrend do a little more damage than that, exceeding the lows that I’ve labeled #1 and #2 on the chart displayed above.