GCG12

We hold a two-contract tracking position whose cost basis, adjusted for paper gains on six contracts already exited, is 1715.10. A 1720.00 stop-loss should be used for both in conjunction with a one-cancels-other order to exit one contract at 1740.70. That's slightly below a minor Hidden Pivot target, and although Sunday night's nasty bull trap missed our number by a hair, the stop-loss still applies.  These numbers relate to the March contract, but you should roll into the Aprils as soon as possible, allowing a price differential of about $3.  Basis April, a stop-loss of 1724.30 would apply in conjunction with a closing order on one contract at 1744.90.  Our adjusted cost basis will be 1718.10.  As of around 8:35 p.m. Sunday (EST), the corrective weakness targeted 1729.20, basis the February futures.

For your guidance, I am tracking a single contract whose 1701.30 cost basis has been reduced by paper profits taken on three contracts exited along the way. The suggested stop-loss at 1713.10 is cautious but justified in my opinion, since Wednesday's rally spike was triggered by Fed news whose impact may not linger. In fact, there was no lingering effect whatsoever on stocks, which sold off moderately.  Why? The announcement that interest rates would be "held" close to zero for the next three years was about as unsurprising as anything the mountebanks and charlatans at the central bank could have ginned up in the way of a press release. Despite the tight stop-loss, I view the latest price action in Gold as quite bullish, since the peak of yesterday's powerful lunge created a brand new impulse leg on the intraday charts (see inset). Even so, the pullback needed to set up a second thrust could be punitive -- sufficiently so to turn our theoretical gain into a loss. This I am not willing to abide, especially since we can re-enter at will any time using camouflage to keep risk tightly under control. That said, night owls can use the pattern shown to buy four more contracts. The implied risk per contract would be $350 (25% of the A-B leg) using the large pattern, so you'll need to execute the trade camo-style at an 'X' entry trigger of lesser degree to keep theoretical risk below $80 or so per contract. _______UPDATE (11:45 a.m. EST): Using the larger pattern (with a one-off A at 1703.70),  entry was signaled at 1721.20. Since I'd cautioned against using an 'X signal with such a large stop loss, we'd have looked for our camouflage opportunity on a chart of small degree. The 3-minute chart (inset) shows

Yeah, yeah, I know. Yesterday's rally felt absolutely fabulous! Color me slightly skeptical, though -- skeptical enough that I'm going to continue to take this uptrend's vital signs each and every step of the way. Which means that we cannot ignore the fact that the $65 reversal failed to surpass even a single 'external' peak on the hourly chart (see inset). Bulls could easily remedy that today with a print at 1728.00, but let's not jump the gun. Camouflageurs will likely find themselves in the midst of a riot this morning, so I won't even pretend to offer you an easy way in. However, you'll have a 1741.70 target to shoot for, subject to confirmation by, and possible resistance at, 1717.70, the midpoint pivot associated with the target. My hunch is that the first impulsive ABC pattern that takes out Wednesday night's 1714.20 so-far high will produce a winning trade. _______ UPDATE (11:06 a.m. EST): And it did: with ABC coordinates on the 10-minute chart at, respectively, 1703.70 (4:30 a.m.), 1719.80 and 1713.20. Entry was triggered around 6 a.m. at 1717.30; then partial profit-taking on half the position at=1721.30, and a second round of profit-taking at 1729.30 (aka 'D').  For your further  guidance, I'll track a single, remaining contract from an initial buy of four. It's effective cost basis, reduced by paper profits taken so far, would be 1701.30. For now, used a fixed stop-loss at 1713.10, since a print there would turn the lesser charts impulsively bearish.

The chart shows a 1690.10 target I'd mentioned earlier as a logical minimum rally objective if and when Monday's 1681.80 peak is surpassed. Camouflageurs should use the 15-minute chart, which displays a series of potentially usable internal and external peaks between here and 1680.

Now that a well-advertised Hidden Pivot target at 1681.50 has been achieved we should look for the futures to take a breather for at least a day or two. Any less would indicate that bulls are still chomping at the bit even after having run hard since December 29. Once above 1681.50, the next likely stop would be 1690.50, a minor Hidden Pivot given here earlier. Camouflageurs looking to get onboard will have two external peaks to leverage here, and the ideal opportunity would come on a shallow pullback from between them (see inset).

A 1681.50 target may be growing stale, but that does not invalidate it.  Late Sunday night, DaBoyz were attempting to develop thrust sufficient to push the February contract above Thursday's 1670.60 high. Camouflage entry opportunities were exhausted earlier this evening, however, when the futures pulled back after breaching an external peak at 1668.80 also recorded on Thursday. Bulls take note: a breakout above 1670.60 could be a trap, since there's an additional Hidden Pivot resistance at 1673.70 (see inset) with potential stopping power. _______ UPDATE (3:36 p.m. EST): The longstanding target at 1681.50 nailed the apex of today's $18 rally within three ticks.  Because it was so long in coming, we should treat the high as a potentially important one.  However, if bulls should blow past it today or tomorrow, the next logical stop would be 1690.50, a Hidden Pivot.

A modest rally target at 1681.50 is still the only game in town, and I'm not even going to reproduce a chart that shows it today, since we've already done that to death.  The ostensibly bullish dirge is to be expected, since gold has hitched its wagon to a stock market that, while headed predictably higher, is so lacking in energy and inspiration as to be incapable of gaining more than an inch or two per day.  This being a Friday, and current price action comprising little more than dueling pansies, I'll offer you nothing bold.

The futures remain on track for a rally to 1681.10 (or perhaps 1681.50), but the pattern that presumably will get them there is sufficiently clear and compelling that I'll suggest shorting near the target via a 'camo' entry.  Keep in mind that the position is to be implemented with four contracts and that the theoretical risk (i.e., the distance between the signaled X entry point and the point 'C' low of the pattern) be no greater than $70 per contract. I hesitate to suggest substituting mini-contracts to achieve this, since the dangerous illiquidity of mini bullion futures more than offsets the peace of mind we might hope to get trading a downsized vehicle.

Since gold has been moving in lock-step with stocks, this evening's very bullish tout for the Dow Industrials implies that bullion quotes are likely to continue along the bullish path begun from 1524 on December 29. Accordingly, we should continue to favor the 1681.50 target given here yesterday as a minimum upside objective for the near term. If that number is achieved, bulls should take encouragement, since it would complete a minor rally pattern above the important midpoint pivot of the four-month-old correction, effectively transforming a major resistance into a presumptive support.