August 2010

Gold forced a few green shoots through concrete yesterday, setting the stage for a shot this month at June’s all-time highs near $1270. That would require a further rally of just 3.5 percent from current levels, based on yesterday’s $1226.90 settlement price for the Comex December contract. We’d anticipated Monday’s $13 push through resistance with the following forecast, disseminated to Rick’s Picks subscribers Sunday night: “Last week’s bullish finishing stroke brought into focus a minor Hidden Pivot target at $1229.10 that we should use as a minimum upside objective for the near term.  That may seem like a conservative goal because it lies just $12 above Friday’s settlement price, but it would have decisively bullish implications, since the target is above heavy supply created over a two-week period in early July. The futures are almost certain to push above the supply zone this week, but the earlier in the week they do so, the more bullish the implications will be going forward.” As it happened, the bulls’ successful use of the battering ram came earlier in the week than we might have expected -- on a Monday – and this is indeed a sign that buyers are probably eager for more.  By day’s end, they had pushed the December contract past our target by 40 cents, as well as through a supply zone near $1222 that had resisted their best efforts for nearly a month. Moreover, a subsequent pullback from the 1229.50 high amounted to just $6, more than half of which had been recouped by day’s end. All of this augurs more upside over the near term to at least 1244.20, a Hidden Pivot target that appears in the same sequence as yesterday’s. Seasonal Factors In the Rick’s Picks chat room -- which has been quiet lately, as is often the case at this time

Bob Prechter recently reiterated his deflationary outlook in an interview with Jim Puplava of Financial Sense.com. Click here  for some choice excerpts.

Click here for the latest dispatch from Auerbach Grayson, No Free Lunch on Wall Street.  "This is not our first rodeo," writes Grayson global technical strategist Richard Ross, "and we have no intention of letting a classic low volume, thin market, late summer squall on the heels of the best month (July) in a year, throw us from our Bullish stance. Nothing has changed from a week ago and today we reiterate many of the same emerging, frontier and developed market themes which we have espoused for months in markets both up and down."

Nothing tricky here, analytically speaking. We'll use the obvious pattern shown in the chart in order to stipulate that September Silver must close above the 18.485 Hidden Pivot midpoint before we assume buyers are back in control. At that point, the futures would become an odds-on bet to continue over the very short-term to at least 19.170, the midpoint's 'D' sibling.

I won't bore you with the details, but technically speaking, last week's slide was impulsively bearish only on the intraday charts, not on the daily. (Please note: The decline on the DJIA's chart WAS bearishly impulsive.)  My gut feeling is that the futures will need to head-fake above Friday's 1089.00 peak before they plunge in earnest.  If not, a nearly 14-point fall awaits this morning, since that's what it would take to reach the midpoint support of the pattern shown.

Last week's bullish finishing stroke brought into focus a minor Hidden Pivot target at 1229.10 that we should use as a minimum upside objective for the near term.  That may seem like a conservative goal because it lies just $12 above Friday's settlement price, but it would have decisively bullish implications, since the target is above heavy supply created over a two-week period in early July. The futures are almost certain to push above the supply zone this week, but the earlier in the week they do so, the more bullish the implications will be going forward. ______ UPDATE (10:10 a.m. EDT):  The prediction panned out precisely, December Gold having surged this morning to a so-far high at 1229.50. The pullback has been a relatively shallow $5, and if that's all bulls need to take another leg up, we should infer that the next target above, 1244.20, will be achieved within days.

Even considering last week's selloff, bulls would seem to hold a very small edge at the moment, since they slightly bested bears in the "duel" evident in the 240-minute chart. Notice that the rally to 10720 on August 9 exceeded one internal and one important look-to-the-left external peak. It was followed by a decline that exceeded two external lows, and although it's a close call as to which feat was more impressive, I'll give a slight edge to bulls.  That doesn't mean we should expect the Dow to romp to new highs -- only that we should be prepared for a possible head-fake into no-man's land before the blue chip average dives anew.

Whatever we might expect from the latest Hindenburg Omen, it is probably too close to Labor Day for anything exciting to happen on Wall Street. Only second- and third-stringers will be working between now and the holiday, and the decision-makers, ensconced for the duration in their Hamptons digs, probably won't even be taking phone calls.

Chuck Cohen sees numerous signs that gold shares are (finally!) about to break out.  Click here to access his 12-page report.