December Gold hit our bullish target yesterday but couldn’t get past it, suggesting that some further consolidation may be needed to set up for the next big push. We’d projected a rally to at least 630.60 a few days back, and that’s almost exactly where the futures stalled yesterday, at 631.40.  However, if they can  close above the target for two straight days, or trade more than 1.80 above it intraday, I’d rate the December contract an odds-on shot to achieve the considerably higher target flagged in the Touts section of Rick’s Picks.

We may not have to wait long, since gold shares looked primed to move higher on Friday. Goldcorp, a subscriber favorite in which we hold a small position, pushed above Tuesday’s high, renewing a bull cycle that should carry the stock to at least 27.37, 60 cents above Friday’s settlement price. Shares of Newmont Mining, which we also hold, looked less impressive, but the fact that they’ve managed to stay very overbought on the daily chart for more than two weeks is an encouraging sign. We hold a vertical call spread that was legged into for a net credit, so we literally can’t lose no matter what the stock does.

(Click on chart to enlarge)

There is less certainty about a backspread we’ve been building, IBM calls versus QQQQ puts. The position is designed to generate a profit no matter which way the stock market moves, but it hasn’t helped that IBM has been moving sideways for nearly three weeks. Even so, my gut feeling is that option premium is cheap right now and that buying straddles and strangles is the way to go.  The CBOE Volatility Index (VIX) has been dragging bottom for more than two months while stock market technicals have steadily deteriorated. We don’t have to bet the farm that volatility is going to explode, but puts and calls are cheap enough right now to warrant nibbling around the edges. We’ll know more on Monday, since bellwether IBM appeared bound for a Hidden Pivot support at 90.91 (see chart above), just 27 cents beneath Friday’s low. Watch for the turn at the target, since it could telegraph the resumption, for the broad averages, of the still dominant bullish trend.