August 2009

September Silver signaled significantly higher prices ahead by blowing through an important Hidden Pivot midpoint at 14.500 yesterday. This was the futures' first encounter with this resistance in the context of the pattern shown in the chart, and it implies that the midpoint's 'D' sibling at _____ will be reached.

The 76.59 target given here yesterday remains my minimum downside objective and a logical place for a corrective bounce to occur.  However, if 77.86 is exceeded first on a rally, that would turn the short-term picture significantly brighter, warning shorts to get 'em in.

A Hidden Pivot resistance at _____ is equivalent to the target given for the cash Dow in today's Side Bets. I'll suggest buying two September 91 puts (DAVUM), good through Thursday, if and when the stock reaches the target.  The options would be attractively priced at around ____ if you want to park a limit order with your broker, but be prepared in any case to stop yourself out if DIA trades above _____. I've included a snapshot of my option calculator, into which I've plugged a 23 volatility that I interpolated from Tradestation.

We've been using a Hidden Pivot at 9476 as a a minimum upside target, but another at 9527 now looks more compelling.  See today's DIA forecast if you're looking for a relatively riskless place to try shorting.

Gold extended a five-day rally to surpass a second peak on the daily chart. This is unmistakably bullish and makes a push to $1000 over the near term very likely, even if it's not the rally that will take prices into the promised land.  My gut feeling is that new peak exceeded yesterday -- 968.90, recorded on June 10 -- should have been breached a day earlier if this bull cycle were destined for greatness. In any event, a move up to at least _____ now appears all but certain. The target is show in the accompanying chart, and, as always, if it's easily exceeded we should infer that still higher prices are likely -- in this case, a minimum _____.   

Yesterday's rally, tired as it was, surpassed our 1002.00 benchmark nonetheless, and with it an obscure November peak whose breach could refuel bulls for yet more weeks or even months. The ____ rally target of two minor patterns is still valid, but it will be less enticing as a place to go short than if it had been hit the first time around.  A _____ stop-loss is advised once again if you take the trade, but don't if you are not confident that you can exit it nimbly if it goes against you.

(Following is the sixth in a series of article on gold by Chuck Cohen, a financial consultant and investor based in New York City.) Last week, I explained why junior and exploration gold-mining stocks will be spectacular investments in the impending 21st Century gold rush. I will discuss specific stocks in the weeks ahead, but first let's talk about how to accumulate them.  Because juniors are quite different from other stocks, the best approach to building a portfolio is to stick with a game plan formulated in advance.  For starters, you should look for stocks of companies that hold the most resources or have the greatest potential relative to their market capitalization. There are some companies that have a $10 million capitalization, with good results and the potential for one to three million ounces.  If the price of gold were to rise to $1,500 or $2,000 next year, odds are excellent that such stocks would increase in value by five  or ten times. Spread Your Risk Jay Taylor, one of the best and most successful stock pickers, recommends that you initially try to put five percent of your funds in a single stock. This is an excellent way to start. If you put too much in one or two stocks, your gains might be greater, but so will be your risk, and this could lead to emotional decisions.  If one or more stocks go up a lot, you can sell some and put the proceeds into others that haven't moved. Remember, with most of these stocks, you are playing the odds, and some will soar while others will lag. It's okay to increase your position size if the results better your expectations, or if the company has bought a lot of contiguous property. This last point is usually a tip-off that management is very encouraged by what they are finding.

Tonight's midnight briefing at 12:01 a.m. EDT will be geared toward finding a profitable E-Mini trade for night owls, even if markets are thin. This condition has its advantages, as I hope to demonstrate.  If you're not signed up already but would like to attend, there's a link near the end of today's commentary.

The Diamonds looked bound for at least 93.65 over the very near term when the clock ran out yesterday, so this vehicle is probably best traded from the long side if it doesn't gap too ferociously above yesterday's highs near 93.  The benefit of camouflage seems unlikely, but my hunch is that a straight point 'X' entry on the very lesser charts will work if it is the first such opportunity of the day.