I cannot recall ever having seen a selloff obliterate Hidden Pivot supports as easily as yesterday’s landslide did. I’d proffered 1212.80 target as a place to “back up the truck” because it was an exceptionally clear and compelling target.  In the actual event, the futures took a brief, $7 bounce from two ticks above that number…and that was it.  The fact that the rally died after just a few bars warned of the carnage yet to come.  The selling was best explained by Dan Norcini at Jim Sinclair’s web site. He  saw it as an unwind of gold/euro hedges.  The euro soared yesterday, apparently buoyed by the idiotic notion-of-the-day — that perhaps Europe’s financial situation is not so bad as was thought earlier (“earlier,” meaning, perhaps, the day before).  This is nonsense, since Europe is in the same deflationary bog as the U.S., irrespective of whether they take “austerity” to heart or instead choose to run the printing presses at full steam.  Equally nonsensical was the idea that gold was due for a thrashing just because of a (presumably fleeting) blip in sentiment favoring the euro.

In fact, Gold has been rising — and will continue to rise, once the hysteria we witnessed yesterday subsides — simply because the entire global financial system is being kept (barely) afloat by lies, hubris and an epidemic of delusions.  Ditto for the dollar and U.S. Treasurys — possibly the worst excuse for “safety” that an investment world gone insane could conceive of.  We’ll give Dan Norcini the last word, since his assessment seems dead-on: “Gold is not going to lose its safe haven status because we experience a day of trade unwinding on a large scale. When the focus shifts back to the woes involving the health of the US currency, gold’s fortunes will revive and it will begin moving higher.”

Concerning the technical picture, there is no question that yesterday’s slide did serious damage, creating the first bearish impulse leg of daily-chart magnitude since last June. That event had a bullish outcome, however, and we expect that this one will too. For starters, bulls will need a quick burst to at least 1222.90 today to turn the 15-minute chart in their favor. Alternatively, although I cannot yet predict with confidence how far this correction will go, we can glean a sense of its power in the subtlest rallies and corrections that occur over the next few days. Most immediately, as of around 11:45 p.m. EDT, a minor rally on the 15-minute chart projected to 1211 — $3 above the current price. If it is reached or exceeded, and if the subsequent correction fails to reach its ‘d’ target, that would be a bullish sign for Friday.  Long-term bulls should be focused on the ‘p’ midpoint of whatever correction develops on the daily chart, since a breach could imply another leg down as nasty as yesterday’s or even worse.  I’ve sketched out a possibility in the accompanying chart.