December 2009

Someone in the chat room mentioned Tuesday night that GLD had a cleaner downtrend than February Gold, with no "sausage" B, so I thought I'd have a look.  True enough, and if you can contrive to ignore the fact that there is no one-off 'A' on the hourly chart, there's a 106.12 downside target to use -- a little more than 4% below these levels. This is more or less in line with the 1094.30 target given for the futures, but it has been more clearly corroborated by the rally from 110.21, which lies just 0.04 points from the midpoint support. Bottom line:  You can use 110.17 as a fail-safe point for gold over the near term.  If the support is breached, it would likely spell more weakness over the near term.  Alternatively, GLD would need to print 115.36 today to turn the hourly chart unambiguously bullish.

In the opening minutes of the session, the futures bottomed within three ticks of the 1087.00 target shown in the chart, then spent the rest of the day chopping their way to nowhere. Bears dominated at the close nonetheless, and we should therefore use a Hidden Pivot at 1078.00 as a minimum downside target once yesterday's lows are breached. That number will remain viable as long as 1097.50 (aka, point 'C') is not exceeded to the upside first.

It took gold four tries on the hourly chart this week to take out the panic low at 1135.80 recorded on  November 27, so we should still not be entirely impressed by this selloff. Hidden Pivot aficionados will probably come up with a 1094.30 target, using the ABC coordinates shown in the accompanying chart. That might prove to be the case, but 'B' is pure sausage as far as I'm concerned -- indicative of a downtrend that lacks real guts. If you want to be sure, I'd suggest monitoring the lesser abc patterns on the 3-, 5-, and 15-minute charts. For bulls, the good times would begin to roll on the 3-minute with an 1140.50 print.

That icon of rectitude, Dave Letterman, took a few cheap shots at Tiger Woods Monday night, but who doubts that the sardonic talk-show host will eagerly kiss the bottoms of Woods’s feet to get him on the show a few months from now, when the world’s greatest golfer has been cleared by his agent for the obligatory media comeback tour?  Tom Hanks, a guest on Letterman’s show that night, showed some class by shooting down each of the less-than-hilarious“Top Ten Ways Tiger Can Improve His Image.” Hanks forced a raucous, fake laugh on #9 (“Change name from ‘Tiger’ to more adorable ‘Puppy’ ”); dead-panned a blank stare on #3 (“Release list of women he did not have sex with"); and declared that he did not “care for that kind of humor" on #6 (“Instead of sweat shops in Asia, have Nike merchandise make sweatshops right here in the USA”).  Lettermen, you may recall, was at the center of a scandal himself just a couple of months ago, when it was revealed by a blackmailer that the married talk show host had been banging at least two women on the Late Night set.  It would appear that that scandal has blown over entirely, at least outside of Letterman’s home. On Monday night, Hanks’ dour reaction shots were funnier than the material itself, but the skit still would have laid an egg if Letterman hadn’t made a couple of jokes at his own expense. “Maybe I’ll learn a little something myself here tonight,” he quipped before reading the list. We’ll lay odds that when Tiger finally comes on his show, Dave will set a standard for sucking up to celebrities that will eclipse all of his previous suck-up interviews with such worthies as Paris Hilton and Madonna.  Remember Britney?  Unfortunately for Tiger, his

Around 1:30 a.m.  EST, the Mini-Indexes were poker-faced, three ticks above the day session close, and gold was down by about a dollar.  However, by puncturing the 1167.50 resistance noted in today's tout before receding with the tide, the Comex February contract subtly signaled that buyers will be ready to rumble today with the Forces of Darkness.

We hold a round lot with an effective cost basis of 11.01 and a long-term rally target of 27.15.  As detailed here earlier, I am recommending that you short a December 23 call against the stock if and when the target is reached, and that you also buy a January 23 put at that time.

Silver's bullish impulse leg on the hourly chart is similar to Gold's and portends a rally over the near term to at least 18.650, provided its sibling midpoint at 18.405 can be overcome. If the futures get past it easily, that would suggest that the finishing stroke to the higher number will be unlabored as well.   Please note that it will take only 18.590 to refresh the bullish impulse on the hourly chart.

The December 17 - January 15 call spread could have been bought for as little as 0.35-0.40, but we'll use the 0.55 price advised when I recommended rolling our call spread out to January. This means we are long eight December 12.50 calls effectively for a 0.40 debit (i.e., long stock for 12.90), and short eight January 17 calls for 0.80. Don't worry if you didn't roll the spread;  the goal in any case is to come out of next Friday's expiration with 800 shares of stock to hold as a long-term position. The short January 17 calls will simply give us a little downside protection at a cost of limiting our near-term upside potential above $17.80.

Some gurus and permabears have already throw in the towel on the possibility of a meaningful decline during the remainder of the year, but let's not forget that there are some potentially VERY important Hidden Pivot rally targets just a two-day rally above these levels.  I remain confident not only that they will be reached, but that the futures will correct sharply after making contact.  The price action that follows could conceivably become part of a rolling top that carries into next year, but the chance that a major top is in should not be dismissed.  Here are the targets once again, respectively, for the December and March futures:  1138.50 and 1140.00;  and 1127.25 and 1129.50.