September 2008

Silver's monthly chart does not yield ABC price points analogous to the ones I've used in Gold. so I will arbitrarily start with an 'A' of $2.00, and use the 21.640 high recorded in March as point 'B', the terminus of the impulse leg. That gives us a 'D' target at 29.955 and a 20.130 midpoint. The latter will serve as our minimum upside objective for the near term. _______ UPDATE: A Hidden Pivot support at 12.680 is analogous to the one in Gold where I've suggested bottom-fishing. _______ FURTHER UPDATE: Silver bottomed at 12.540, the precise Hidden Pivot target of a pattern I had neglected to consider on the 5-min chart: A=12.830 (7:20 p.m.); B=12.630; and C=12.740.

In restrained selling Sunday evening, the futures looked bound for 1214.00, about 18 points below where they are trading now. Night owls should look to short near the 1240.75 midpoint if DaBoyz squeeze 'em that high Sunday night. Otherwise, you can bottom-fish with a 1214.25 bid, stop 1212.75. Caution is advised, since volatility could explode on the opening following a deceptively placid Sunday night. _______ UPDATE Using an initial stop-loss as tight as two ticks, the short would have triggered at 2:30 a.m. EDT and produced a gain of as much as $250 per contract, provided you'd exited on the subsequent low, 1235.50, 50 minutes later.

The Dow Industrials rallied 614 points from their lows yesterday. Do we risk your scorn, gentle reader, by characterizing the move as unimpressive? Let us explain. Notice in the chart below that, at the very height of yesterday's hysterical short squeeze, the Dow Industrials failed to take out Tuesday's imposing peak. Why should that matter? In two words: impulse legs. Impulse legs are at the heart of Hidden Pivot analysis, and by applying just a couple of simple rules, we know how to spot a fake. By our criteria, yesterday's breathtaking thrust, powerful though it may have seemed, was a blatant phony, presumably incapable of surviving for more than another day or two. The rip-roaring rally in fact masked a yellow streak as telling as the Cowardly Lion's swishy tail. We hesitate to ascribe animal behavior to something so coldly indifferent to humanity as a stock average, but we do so anyway, since employing this perspective has always helped us to understand why stocks do such crazy things. By our lights, rallies that have real guts almost invariably tend to surpass any obvious peaks to the left of them. This one did not, and we can only infer that it chickened out when it 'looked' to the left and saw real resistance in the form of a daunting prior high. Clown Alley Commentators attributed the market's wildly bullish behavior to several factors, all of them manifestly too idiotic to discuss. One was that the Government was thinking about creating an agency similar to the Resolution Trust Corp to help dispose of distressed assets. It was one thing, in the early 1990s, to invite the pishers in to buy golf courses, Impressionist paintings and other such bric-a-brac. But we wonder who Uncle Sam has in mind to buy America's airlines, auto

Just because a rally is a patent fraud does not necessarily mean it cannot go higher. This one would create a bullish impulse leg on the hourly chart with a print today exceeding 1239.25. That's not much, and if the futures were to hold onto even half their gains, DaBoyz would be in fabulous shape to continue harassing shorts as next week begins. There is no reason to stick our necks out today, but neither should we fear picking tops and bottoms of minor trends. As I mentioned in Thursday's commentary, the stronger the trend, the more reliable the Hidden Pivot targets, especially on the intraday charts. _______ UPDATE: As of 1:20 a.m. EDT, a rally to at least 1262.00 looks baked into the cake, with an outside shot at 1283.50 if things spin out of control.

It is Thursday night, around 8:40 EDT, and the rally is playing toe-sies with a midpoint resistance at 11194. The 'D' sibling of this number is 11429, and that's exactly where the futures should be presumed headed if they break free. _______ UPDATE: 11149 was just a weigh station on the way to even more ridiculous heights. Even so, the most monstrous short-squeeze rally in market history has yet to exceed the point 'C' high on the weekly chart that indicates...9615.

Yesterday's fleeting, spike high suspiciously failed to take out any daunting peaks along the "wall" of the July/August decline, so we'll be monitoring gold's vital signs more closely than usual today. In practice that will mean determining whether downward retracements in various time frames are reversing from midpoints (bullish) or 'D' targets (bearish). The first such pattern to observe is the one shown in the accompanying chart, with a midpoint at 830.00 and a 'D' target at 794.60. As always, a breach of the first by more than a small amount (in this case, perhaps 40-50 cents) would imply that weakness is likely to persist to at least the second. More bearish would be if the futures close below the midpoint, and more bearish still would be an overshoot of 794.60. _______ UDPATE: A collapse overnight brought the futures down to 828.50. Although that's a tad more than the 50-cent overshoot I'd allotted, we'll consider the damage over and done with for now. However, a close below 830.00 would still indicated another nasty leg down to at least 794.60.

Strongly trending markets have yielded an apparent bonus, causing stocks, futures and options to move more precisely than ever to our Hidden Pivot targets. Gold, for one, appears to have put in an important bottom within a single dollar of a 738.80 target that went out to subscribers on September 10. With the Comex December contract trading $40 higher, at 778.80, here's the Rick's Picks tout that was disseminated: 'A 738.80 target broached yesterday in the chat room is my minimum downside projection for the near term, but if the futures close below it, that would create additional downside jeopardy to as low as 628.00. The pattern speaks with authority, since the AB impulse portion was sufficiently powerful to breach two internal and one external lows on the weekly chart without a correction. ' (Click on chart to enlarge) Fortunately, December Gold did not breach 738.80; for if it had, especially on a closing basis, it would have dramatically increased the odds of a further fall to $628. As gold began to rebound we turned cautious, although not bearish, with this analysis: 'For all we can tell at this point, the 738.80 low recorded yesterday could be Gold's worst moment for the next fifty years. But we'll need to start seeing some bullish impulse legs on the lesser charts to ease our suspicion that the worst may not in fact be past. For today, that would imply a thrust exceeding 763.10, a tiny but nonetheless significant "external" peak shown on the accompanying chart.' Yesterday, the bullish impulse leg we were waiting for came like a bolt from the blue, clearing the first of two key hurdles that lie between current levels and the promised land above $1000. The higher of the two obstacles is a tiny but technically important peak

As powerful as the rally has been, doubters can be forgiven for being less than certain that this will be the thrust that pushes gold permanently above $1,000. Granted, on the daily chart, the impulse leg has racked up gains so far of $157 without taking a breather of more than a day, and that's got to be a record. But we'd feel even more confident about the remainder of 2008, and about 2009, if the so-far unpaused thrust were to tack on another measly $37, exceeding the small "external" high shown in the chart. In Hidden Pivot parlance, that's a "look-to-the-left" peak along the "wall" of a very steep decline, and we prefer that our bullish impulse legs take out at least one such resistance before we certify a reversal rally as invincible. Can the futures do it? It will take a push to 934.60 without a correction lasting more than a day, so we'll just have to wait and see; for then, and only then, can we be sure. More immediately, the pullback Wednesday night from a day session high at 897.40 has breached some lows made on the way up, so don't be surprised if Thursday brings a day of consolidation. I can find no footholds for a speculative bid overnight, but if one comes, the best place for a Pivoteer to find it would probably be on the 3- or 5-minute chart.

The December contract did everything we asked of it yesterday and more, rallying through the range 11.670-12.255 without a pause. Now, the upside potential over the near term is to as high as 14.165. We'd infer the rally to that number is under way following a "booster-stage" thrust of at least 55 cents from a low falling anywhere between 12.110 (already exceeded, barely) and no lower than 11.260.