June 2009

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.

Peter Schiff hacks his way through a jungle of lies to explain why the Obama Administration’s “charm offensive” to talk up the dollar, and therefore U.S. Treasury paper, cannot possibly succeed over time.

You can access this morning's briefing by first registering at https://www2.gotomeeting.com/register/565149194.  The password for the session (and others scheduled over the next two weeks)  is 'hiddenpivots'.  All session will begin at 9 a.m. EDT and last for 20 minutes.  See you there!

GDX looks bound for a Hidden Pivot support at 40.03 or lower over the near term. The provenance of this target is shown in the 15-minute chart -- and yes, you can bottom-fish there provided you use a tight stop-loss of about 5-7 cents. Like Gold futures, there are no compelling benchmarks we can use to tell whether GDX is turning around. Nevertheless, we can stipulate that this vehicle print 43.34, just above the high of Friday's gap-down opening, to give us reason to take encouragement. _______ UPDATE (1:15 p.m.): GDX touched a low of 39.85 in the first hour, somewhat exceeding the minimum downside objective proffered above. We should infer that a test of conventional support (in the form of some lows near 36.50 recorded in mid-May) is in the offing, but buyers could regain the initiative immediately with a thrust by mid-week exceeding 42.33. (Note: A two-day close above that number would be even more encouraging).

We've been using a HiddenPivot at 112^09 as a minimum downside objective, but I'm going to lower it to _____, a Hidden Pivot that comes from the hourly chart  (where A=123^10, on May 21).  The midpoint sibling of that target, 115^15, was breached by a full point on Friday, increasing the likelihood that the target itself will be reached (although a two-day close above 115^15 would hint of a reversal). We'll switch over to the September contract tomorrow, but for your information, the equivalent targets lie respectively at _____ and  ______. 

Conventional support down near 945.00 will likely turn magnetic if the futures take out Friday's lows.  The actual bottom at 953.80 was a single tick from the target shown in the chart. Considering it took the August contract two days to make its way down to the pivot, the so-far modest bounce must be judged disappointing. If the bounce continues, there are no peak-lets along the steep wall of Friday's decline that we could use for handholds to get on board. Under the circumstances, we'll have to settle for a move above Friday's 966.00 recovery peak to signal a possible turnaround, but it looks too obvious to afford us an edge.

Goldman’s $10 short-squeeze on Thursday and Friday topped at exactly 151.25, a single penny above where we’d expected. Since some subscribers are likely to have laid out shorts at the ______ target (which I’d been drum-rolled), I’ll establish a 400-share tracking position. Since the pullback so far has gone as low as 148.75, partial profit-taking was most definitely in order. I’ll assume 200 shares were covered at 150.00, giving us a profit-adjusted cost basis of 152.49 for the 200 short shares that remain. For now, tie them to a stop-loss at _____.

Friday's secondary low at 934.50 occurred just a few ticks from the c-d midpoint of the pattern shown, implying that a breach Sunday night or Monday morning could send the futures down to as low as 924.75. However, that Hidden Pivot is useless for bottom-fishing because of its close proximity to  Wednesday's low. Alternatively -- and more likely, in my opinion -- is the resumption of the uptrend to a minimum 968.00.  That target is shown on the chart as well, with a pattern begun from 903.50 a week ago. It will remain valid as long as the point 'C', last Wednesday's low at 922.50, is not exceeded to the downside. _______ UPDATE (1:07 p.m.): After a very brief flurry of short-covering on the opening, weakness has dominated.  As of mid-session, the low so far has been 925.50 -- three ticks above our 924.75 downside target.

The guy in the picture spent the weekend shuffling around the pedestrian mall in Boulder, Colorado, but he should try hanging out in front of the COMEX in New York if he’s serious about buying gold and silver cheap.  It was there on Friday that bullion was not merely “unwanted,” but positively despised. Exchange traders couldn’t dump the stuff fast enough, judging from the way prices plummeted early in the session and barely bounced for the remainder of the day.  When the dust had settled, August Gold was sitting at 957.50, down 24.80. July Silver got hit nearly twice as hard in percentage terms, diving 64 cents, or 4 percent, to close at 15.25. Some attributed the selloff to disappointment over gold’s inability to push above $1000 last week after hovering briefly above $990.  In that regard, we must confess to have been somewhat disappointed ourselves, since we had predicted a surge to at least $1008, followed by a quick consolidation, then a follow-through to $1066. Now it looks like we’ll have to wait. But for how long? Our suspicion is that the sellers got some help from Friends on High. Although we’re not big on conspiracy theories, it seems doubtful that disappointment alone could have accounted for the drubbing bullion received on Friday as it revved up for a move past $1000 that had seemed a foregone conclusion. It felt more like a shot across the bow – a warning to any speculators who fancy themselves getting rich effortlessly as they dance on the dollar’s grave. A Resurgent Dollar? Not on Friday, though, they weren’t. The U.S. Dollar Index recorded its biggest one-day leap in months, rising 1.24 points to end the day at 80.67. We can’t say we were surprised by this, even if gold’s weakness caught us