Dark Signs in Dollar and Goldman Shares

The dollar extended its winning streak yesterday, rallying overnight to narrowly exceed the bullish benchmark we’d set for it just a day earlier. If the dollar is indeed reversing direction after three months of steady weakness, it could darken the economic picture. The reason is that it would put pressure on all who owe dollars, intensifying the effects of a global debt deflation that has been 

tightening its grip for nearly two years.

The greenback’s rally is just four days old and therefore still fragile, but there are signs that there is yet more buying power percolating beneath the surface. Notice in the chart above how Monday’s rally exceeded the three labeled peaks. The first of those peaks was nothing to get excited about; however, the breach of #2 and #3 was more impressive, since those were more daunting “external” peaks made on the way down. By popping through all three of those highs yesterday without pausing for breath, the Dollar Index created a short but powerful “impulse leg” on the hourly chart. Such rallies usual presage follow-through thrusts of equal magnitude, which in this case would suffice to generate yet another impulse leg, renewing the bullish trend.

 Missed by a Penny

Another market-related event that hints of a possible tone change is the recent weakness in the shares of Goldman Sachs, which we have viewed as a stock-market bellwether in recent months. More recently, we were looking Goldman to peak at exactly 151.24, a Hidden Pivot resistance. On Friday, after surging $10 in just two days, the stock apexed a penny above our number, at 151.25, then retreated to a low of 146.19 yesterday. We covered 300 shares of a 400-share short position from 151.24 and are holding the last hundred shares for a possible home run.

Is Goldman’s spectacular run-up from a $47 low in November over? It’s impossible to say for sure, but if the stock continues to fall, it is all but certain the broad averages will fall along with it. Goldman’s joy ride has been fueled by delusions that the financial sector’s worst-ever crisis is over. We very strongly doubt this, notwithstanding the banks stocks’ powerful rally. If we are wrong, however, and Goldman shares are about to take another leg up, the next important Hidden Pivot above these levels is 171.87. That’s nearly 16% above yesterday’s settlement price, and it would become our minimum upside objective if the stock should close for two consecutive days above 153.50, a lesser hidden resistance that we’ll be looking to short as we did 151.24.

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Calling All Traders…

Ever found yourself sitting on your thumbs after the opening bell, waiting for the dust to settle?  If so, then you know how much harder it becomes to trade profitably as the day wears on. That’s because once a market has established an opening range, trading becomes essentially a frustrating game of second- and third-guessing other traders who are trying to second-guess you.

But suppose you were able to predict the high or low of the opening range beforehand?  Using your crystal ball, you could be waiting at the bell with your bid or offer, ready to pounce on what will later turn out to be at the high or low of the day. Wouldn’t that be a trick!

That is exactly what we attempt to do each morning, using the Hidden Pivot Method to spot predictive price patterns that may have occurred overnight. If you want to see how this is done, and how precisely, please join me for The Morning Briefing each day before the opening this week and next. Beginning on Monday, June 8, these 20-minute sessions will commence online sharply at 9:00 a.m. EDT. Our goal will be to identify trading opportunities for that day, with a particular emphasis on Comex Gold futures and the E-Mini S&P.  The Morning Briefing will be open to all, but to sign up you will need to click on a link at the bottom of the free commentary that I send out via e-mail each day. If you are not already receiving this publication, click here to have it delivered starting immediately. 

See you Tuesday morning!