September 2009

Late Wednesday night, the futures were playing toe-sies with a Hidden Pivot rally target at _____ (see chart).  The actual high so far is ____, and it could go either way.  Notice that I have used, not the one-off 'A' here, but the obvious one. That's because I needed to project the highest target possible from the existing pattern. If it is exceeded, we'll have to move up to the daily chart to find a rally pattern yet to play out. The most obvious one, going back to the March low, yields a bear rally objective of 10431.

Yesterday's high fell a nickel shy of an 11.93 target that leaps to the eye from the hourly chart.  If UNG should exceed that number on a closing basis, however, expect buyers to take it higher, to at least 12.45.

This tout will officially correct a downside target by a small amount, to 75.47. As noted in today's commentary, I expect DXY to fall to that number and then to rally for a spell before plunging anew to 72.93. If the higher target is reached around the same time December Gold is hitting 1074, consider that a warning to lighten up on precious metals.

Here are two numbers to jot down if you’re interested in gold and the U.S. dollar:  75.47 and 72.93.  Those are our current downside targets for the NYBOT Dollar Index, and we are quite confident that both will be reached in the fullness of time. The first lies just 1% below yesterday’s settlement price of 76.28; the second, 4.3% below it.  Like you, we’ve heard many compelling arguments from dollar bulls and bears. Some think it is about to turn very strong, while others see a collapse. Our gut feeling is that the bulls will be right, and that the dollar will rise because of a deflationary short-squeeze on all who owe dollars.  But when push comes to shove, we are perfectly willing to toss everyone’s best arguments out the window – including even our own – and to simply go with the charts.  And the charts say, simply, that the dollar will continue lower after a corrective rally from just beneath current levels. If so, the bearish targets given above would square nicely with our outlook for gold. We’ve been quite bullish on the stuff for a long, long time and have no disagreement with those who believe think bullion’s bull market is still in the warm-up stage. However, our immediate outlook calls for a potentially important top at $1074, basis the December Comex contract. That would imply a rally of about 5% from yesterday’s settlement price of $1020. If this scenario comes to pass, the high in gold would likely coincide with a temporary low in the Dollar Index at the 75.47 target given above.   A Buying Opportunity in Gold And then? We won’t hazard a guess concerning how high the dollar will rally, but we would view it as corrective rather than impulsive. That means gold’s corresponding decline

We lingered on the charts of Goldman Sachs, finding several good reasons to be long right now. With a little more work, we were able to come up with several ways to buy the stock without risking much. We then segued to the E-Mini S&Ps, where we identified a rally target worth shorting with a tight stop-loss. We also discussed why bears should not try to intercept this rally aggressively, since it shows no technical signs of slowing down. Finally, we took a look at Comex December Gold, discovering that the intraday high missed by just two ticks a target that had been a week in coming.

Keep in mind that Goldman remains our top market bellwether and that it's got plenty of room to run before it smacks into any significant Hidden Pivots.  Be that as it may, I am offering a Pick of the Day in the Diamonds that will attempt to pick a top.

Let me reiterate that, with Goldman presumably bound for at least 192.91, any pullback that lines up with Hidden Pivots is a speculative buy. Yesterday, for instance, I'd flagged a major midpoint support at 175.05 where you might have considered doing so. However, the actual low of a nasty swoon on the opening was 175.46.  Although, with Goldman in such a strong uptrend,  we should expect pullbacks to fall shy of their targets, we can still catch the turns -- and trade them -- using camouflage.  Our edge yesterday lay in "knowing" that the correction would reverse from within spitting distance of the midpoint pivot.

The Diamonds are  creeping up on a shortable Hidden Pivot at ____. It's possible we won't get a better opportunity to lay 'em out than yesterday's 97.31 high, but if the opportunity arises today we can at least be ready.  Accordingly, I'll suggest buying two October 97 puts (DAVVS)  if DIA gets within 5 cents of the target.  A _____ stop-loss would be appropriate.  If you want to use a limit order, I estimate that the puts will be trading for about ____ with DIA at or near _____.

Looks like a minimum _____ from here, enroute to a bigger-picture target at _____ that I have more or less promised.  I won't try to split hairs with chat-roomers who have been monitoring gold's every heartbeat, every microtrend,  but I will pitch in with whatever camouflage entry opportunities may crop up (as one did yesterday morning).  There's another in progress at this very moment (albeit with a caveat), as you can see in the accompanying chart. Notice how Tuesday's high fell between the two labeled peaks to the left.