November 2009

I drew a trendline a while back that showed a fearsome chasm opening up on the weekly chart, but it's probably safe to draw a steeper line that will afford bulls an additional cushion if buyers should go derelict between now and year's end. From a Hidden Pivot perspective, the outlook is heartening for the near term -- tradable, even, by night owls, since a spear up to 18.675 has created a nice, but not too, impulse leg on the lowly five-minute chart.  Points A and B are, respectively, 18.535 amd 18.675, but I'd suggest letting the first 'X' entry get stopped out before attempting entry.

Yesterday's nasty little short squeeze recouped last Thursday's air pocket, bracketing the intervening day (i.e., Friday) as an altogether gratuitous, and hardly atypical, swoon. The rally was "camouflaged," strictly speaking, because it vaulted a bunch of prior peaks without getting past the important one at 1112.25 recorded last Monday. That number was three ticks shy of a 1113.00 Hidden Pivot target we'd been using for too long, and it rounds out a picture that explains in graphical form how a market with zero bullish buying interest can keep going higher, and higher and....higher.  I've got an 1138.00 rally target we can use if this tedium should continue, but I won't show you how I derived it because I don't want to encourage bad habits in my students.

The futures turned up tentatively after make a run at an 1155.00 downside target that was missed by $2.70. This is bullish as far as it goes, but it would take a print Monday night at 1168.90  to suggest that buyers are not terribly intimidated by the 1174.90 resistance pivot we've been using for so long. I've hung out a headline target at 1337.00 if it should get shredded, but I am not expecting this, at least not so soon after the lower pivot was achieved.  Keep in mind as well that the futures could feint to 1185.50 without affecting the odds of a serious correction.

Having waited patiently since May for Comex Gold to reach an important target at 1174.90, we are naturally interested in what comes next, since the December contract peaked yesterday at exactly 1174.00.  We say “peaked,” and while this is technically correct because a $16 selloff has ensued so far, that’s hardly enough pain to have sent gold bulls into fits of panic or despair. In fact, the selloff looks and feels like little more than a minor flutter in a bull market that presumably has much farther to go.  Even so, we shall treatyesterday’s high as a potentially important top for the time being because that is our custom. Specifically, whenever a stock or commodity reaches an important “Hidden Pivot” target, we assume that’s the end of the line unless the target itself is subsequently exceeded on a closing basis or decisively intraday.    Although Rick’s Picks subscribers tend to anticipate these targets with a lot of speculative fervor, and to reward each other with verbal high-fives when they are hit exactly, the exactness is a kind of parlor trick that distracts from the targets’ true usefulness. Granted, it’s nice to have a place to get perhaps briefly short in gold without having to risk more than pocket change. In that regard, the 1174.90 pivot was a magic number for scalpers and day traders. But the target’s main purpose was twofold: 1) keeping us steadfastly bullish since mid-May, when gold refreshed a buy signal from five months earlier by hitting a technical tripwire at 946; and 2) allowing long-term bulls to manage the risk of their positions as the target drew nearer.   Riding Out Setbacks  Keeping 1174.90 well in mind since last spring, steadfastly bullish we remained, even though December Gold got thrown for painful losses, each lasting for at least two

With the dollar in a holding pattern tonight after earlier weakness, December Gold appears to be breaking out around 2:30 a.m.  This seems quite bullish, but keep the 1174.90 target well in mind, since it is unlikely to be a pushover.

(I have re-posted this link because the initial response was so heavy.) I have always expected the dollar's collapse to happen in mere hours, not weeks or months.  A blogger named John Galt has imagined how things will play out that day, and his scenario seems to me not merely plausible, but precisely inevitable.  It would have bullish implications for commodity-based economies such as New Zealand's, and this would seem to afford investors a relatively safe haven besides gold when the collapse comes to pass. Click here  for Galt's scary account of a stormy day that seems all but certain to arrive.

In the Rick’s Picks chat room, where the focus is sometimes obsessively on gold, the meaning of “long-term” can range anywhere from 90 minutes to about three hours. Small wonder, then, that whenever Comex precious-metal futures hit an air pocket and briefly plunge, the shock waves wash over the room like a tsunami.  In fact, these fleeting episodes mean nothing, considering that the larger, bullish environment for gold contains more testosterone than a Chicago stockyard. Who needs to worry about what those nasty, retrograde bullion bankers, commercial traders and by-now impotent central banks are doing when you know for certain that the likes of China and India are size buyers? And they are, along with Russia, Indonesia, Arabia and every other sovereign entity that is not afraid to offend the U.S. with a defensive leap out of dollars. Under the circumstances, now that its fan club has grown to encompass the entire non-English-speaking world, gold can barely sell off any more. China is naturally gold’s biggest supporter, since the country supposedly holds three quarters of its $2 trillion cash hoard in dollar-denominated instruments, chief among them a mountain of Treasury paper. Since we know the Chinese didn’t get that rich by being stupid, we can be fairly certain they are not content to merely “hope” that the U.S. economy turns around, taking the dollar along with it.  This scenario is as implausible as a credit-financed auto-and-housing boom in the U.S., and they know it. And so we shouldn’t be surprised to find them quietly buying bullion whenever a large quantity is offered for sale.  Subversive Ideas  This type of buying does not typically drive gold quotes into a bullish frenzy; rather, it supports the market whenever prices turn soft. (There will always be big sellers around to make this happen --

Far from leading the market higher in its hour of need, Goldman has turned into the proverbial cement shoes, sinking whatever prospects remained for a year-end short-squeeze of the broad averages.  The stock has had noticeable difficulty reaching even the Hidden Pivot midpoints of retracement rallies, and so we should now expect to see it achieve downside targets with consistency. The nearest lies at 168.33, and it can serve as a minimum downside objective for the near term. The 161.84 target of a larger pattern remains viable as well.

A key target at 1174.90 remains viable, but we'll focus on a more conservative objective for now at 1155.60. That's a Hidden Pivot, and it comes from the pattern shown in the accompanying chart.  An easy move past it would activate another at 1158.20. These two numbers can be used by scalpers, but from an analytical standpoint any lack of resistance will confirm a swift finishing stroke to 1174.90.