With an unachieved downside target at $513 in December Gold, I am trying to be as conservative as possible about signaling an important, bullish turn. We don’t want to risk being premature buyers if the price of gold, currently just below $600, still has more than $80 (about 14 percent) to fall. In that context, how bullish was yesterday’s v-shaped rally, which saw bullion futures rebound from early-morning lows at $587 to an intraday high $10.50 above? Answer: Better hold off on the bubbly, at least for the time being.

(Click on chart to enlarge)

According to the technical method I use, important trend-changes are nearly always signaled by a thrust exceeding two prior highs (or lows, if a downtrend) that are visually significant on the hourly chart – or better yet, on the daily chart. In the hourly chart shown above, the two highs that would need to be surpassed are labeled #1 and #2. Although they are not visible on a daily chart, they are sufficiently imposing on the intradays that we could infer that any rally that blows past them is the real McCoy.

No Breather Allowed

And I do mean “blow past,” since the move has to be explosive, occurring without any significant pullbacks along the way. That could conceivably happen this morning, of course, but unless and until it does, the bull deserves the benefit of the doubt only up to the rally target of the minor trend, 603.20.  But that’s nearly $4 shy of the 607.10 print it would take to kick the rally into high gear. We have no reason to bet against such an outcome, but neither do we feel inclined to load up on Gold before our benchmark has been achieved.

Hair Trigger Strategy

If an important turn has already occurred, we may wind up missing the move off the launching pad, but we’ll be on board for the main part of the voyage. However, if you prefer to initiate a long position on a hair trigger, December Gold can be bought on a buy-stop at 607.10. Just make sure that the underlying rally describes an unbroken thrust on the lesser intraday charts. More specifically, it should require no more than three or four bars on the 15-minute chart to pop through both of the peaks labeled on the chart above.

Speaking of important technical thresholds, the 1348.25 rally target that I broached a while back for the Mini-S&P remains valid. Please note, however, that any progress above it would imply the futures are bound for an alternative target at 1356.75.  I am very confident that an important top will occur at one of these Hidden Pivots, or less probably somewhere in between. If so, it would imply that one more big push is needed to bring the S&Ps to a level commensurate with the 13045 major top I’ve projected for the Dow Industrial Average.