Comex

Last week’s 900-point Dow rally may have stirred up some bullish excitement on the Street and at CNBC, but it looked to us like a fat pitch for anyone who’s been waiting patiently to get short.  We’ll be looking to do so ourselves next week -- with as little risk and stress as possible, using index futures and or equity put options – so click here if you want a free pass to Rick’s Picks as we attempt this.  You’ll have access not only to detailed trading recommendations that are updated around-the-clock, but also to a 24/7 chat room that draws experienced traders from all over the world.  We hold no open positions in index futures at the moment, incidentally, although we established a bullish tracking position in gold last week just as Comex futures were starting to take flight. With regard to the broad averages going bonkers last week, we were merely bemused spectators as Wall Street’s pros squeezed bears within an inch of their sorry lives. Abetting the short-covering stampede was ostensibly “good” news from Europe, some encouraging retail sales data at the outset of the holiday shopping season, and, for good measure, some ginned-up unemployment figures that took hypothetical joblessness down to “8.2%”.  We were surprised that stocks failed to hold onto their gains after the news came out, and that’s one reason why we’re especially eager to establish a short position against the recent trend. ‘Real Damage’ Another, more technical, reason is that the ups and downs of the broad averages since mid-October have created what we call “dueling impulse legs” on the daily chart. This term is specific to our proprietary Hidden Pivot Method, and it implies that each encouraging rally has been followed by an equally discouraging decline. In general, we should expect healthy

Gold and silver racked up another day of solid gains yesterday, providing some of the most encouraging technical signs we’ve seen in several months.  Most impressive was that numerous bullion-related issues that we track were able to generate fresh, bullish “impulse legs” on their hourly charts, much as we might expect from a rally with more than merely short-term potential. (Click here if you’d like to learn more about our proprietary Hidden Pivot Method.) This was true not only for Comex precious-metal contracts, but for such high-octane performers on the equity side as Silver Wheaton, a Rick’s Picks favorite that has been on a rampage, gaining nearly 22% in less than three weeks. Although we’re always eager to go-with-the-flow, it is our practice to closely monitor rallies like this one lest we be caught unawares by the sort of nasty downdrafts that are common in prolonged corrections. The purpose of such corrections is to shake loose all but the hardiest bulls, and that is why we are always guarding against the unpleasant surprise.  Technical analysis aside, we remain open to points of view that differ from our own, currently bullish, outlook for bullion.  To help readers keep an open mind, here is a bearish note that turned up yesterday in the Rick’s Picks forum. The author is Cam Fitzgerald, a frequent contributor. He argues that the looming 2012 election will put a lid on commodity prices. Cam begins his post by addressing the sunny outlook of “Charles,” who wrote that predicting a bullion rally “just ahead” is a no-brainer. ‘Sympathetic’ Decline “I am not with you, Charles. There is something else at play now that relates to elections next year. Commodities will decline and so will the commodity induced inflation threat. This is not bullish for metals. Gold and Silver,

Although I expect some base-building for a while near $50, Silver looks eager to refute the notion that that number represents a serious barrier.  Check out today's tout for the May Comex contract if you want to see what I think is possible over the near-term.

Because even some precious-metal bulls seem concerned that silver has come too far too fast, we took a close look at Comex futures, Silver Wheaton shares, and the ETF.. What we found was that the strong uptrends in each are showing little strain. Moreover, because their respective rally targets in charts of larger degree are well above current levels, there appeared to be little danger to the long-term bull's health. Rather than worry about the occasional, nasty downdraft, we should simply monitor the lesser trends for signs of the minor correction that could turn ugly.

Silver quotes have come back down to earth with a thud, so perhaps it’s time to review our outlook, which was, and still is, quite bullish for both the intermediate and long-term. The Comex July contract has shed a hefty 10 percent of its value since Tuesday, settling at 17.51 yesterday after peaking just two days earlier at 18.89. Although this has caused some gnashing of teeth and sporadic expressions of anguish in the Rick’s Picks chat room, long-term bullion players who frequent the room seem to be taking the move in stride. We ourselves sounded an especially bullish note a week ago when we wrote that it would be a “piece of cake” for Comex silver futures to push above some daunting reservoirs of supply on the intraday charts.  The June contract duly obliged shortly thereafter, but as you can see in the May futures chart below, the rally left one key high at 18.91 recorded in January undisturbed. Although climactic buying missed exceeding that peak by just 2.5 cents, it was enough to make any selloff that followed a possible threat to the short-term picture. That threat was “actualized,” as they say, by this week’s steep selloff, but it remains to be seen how much more damage will be done. So far, it is minimal, and we therefore still expect the futures to hit a very bullish 21.53 by mid-June. That is our target for the July contract, and it was mentioned in last week’s commentary along with a secondary target at 20.21. At what point would our outlook turn intermediate-to-long-term bearish? That would take a print below 13.89 (!), since, according to the rules of our proprietary Hidden Pivot trading system, that’s what is required to turn the weekly chart bearish.  With respect to the daily chart,