September 2010

Gold and Silver futures look to be in shallow consolidations this evening, very near the top of Tuesday's range. I've given explicit details for each that can help you determine whether a push to the next level -- $1340 and 22.505, respectively -- is imminent.

The weekly chart shows multiple bottoms near 80 earlier this year, but the monthly chart reproduced alongside evinces no support whatsoever at that level. In fact, the Dollar Index would need to fall all the way down to 74.17 to pick up the support of a structural low, and even trendline support is nonexistent down to 75.81.

Yesterday's wicked reversal will surely have gotten the attention of the bad guys, but it also puts the focus on two Hidden Pivot targets noted here previously. The first lies at 21.170, just six cents above yesterday's high; the second, a more important resistance, at 22.505.  As of 8:35 p.m. (EDT) Tuesday, the futures were flirting so comfortably with $21 that you'd think they were old friends.  Please note that a close today above 21.170, or an intraday move exceeding it by two cents or more, would shorten the odds of a finishing stroke to 22.505 in the days ahead.

The futures pulled back $8 after thrusting to 1290.40, and although signs of the struggle I'd predicted at that level were explicit on the intraday charts, by day's end bulls appeared to be gaining the upper hand. The fact that the target was exceeded by $1.50 is mildly bullish by itself, but we'll wait for buyers to clinch the case for us. If, in the space of a day or two, they can close the futures above a target that took a month to reach, that would hold very bullish implications for the intermediate term.  Meanwhile, and to remind you, my minimum target above these levels is $1340.  As long as we take these leaps one at a time, we can trade the rally with the same high confidence that obtained when, at $1251, we set our sights on $1291. There were some nasty selloffs along the way, but we were able to scoff at them, just as we will any silly notions that gold is approaching some kind of important top.

An against-the-grain projection of a bullish turn in the bonds is looking better with each passing day -- particularly yesterday, which gave us an ostensible flight-to-safety that sought refuge in bonds, though most surely not in the dollar. Go figure.  We won't try to parse the logic of it; instead, we'll continue to monitor the futures' progress toward a 133^23 threshold. Its attainment, as I noted here earlier, would clinch the bull trend for the foreseeable future, kicking the larger intraday charts into bullish high gear.

Rather than act surprised that DaBoyz could not spook the futures up to our 1151.25 target, we'll simply infer that would-be buyers are having serious misgivings.  There weren't quite enough doubts to turn the hourly chart bearish by the bell, however, but a little downside follow-through to just 1129.50 would do so today. Be warned, though, that if rationality were to slip beyond the bounds of my chartist-enfeebled imagination, not only would 1151.25 be in play, but so would an even more fantastical target at 1168.00 whose provenance is shown in the accompanying chart.

We'll monitor the action of the E-Mini S&Ps closely, since their failure on both the daily and hourly charts to impulse past three prior peaks without correcting hints of fatal weakness, though not necessarily imminent collapse. Indeed, any pullback to as low as 1120.75 should be regarded as a buying opportunity.

Silver slipped two ticks beneath a minor midpoint support at 20.745 that we identified during yesterday's impromptu webinar, but sellers gave up after struggling for hours to take the futures any lower.  The bounce so far is impulsive on the 10-minute chart, affording night owls a possible entry opportunity if the pullback produces the required single-bar 'C'.  I have explained this graphically in the accompanying chart. ______ UDPATE (2:43 a.m. EDT): Yuk!  The pattern shown in the chart failed to develop when the pullback retraced all the way down to 'A'.  As of the moment, the correction looked bound for at least 20.615.

Waiting for a finishing stroke to 1290.90 has become so tedious that perhaps we should be on our guard against the unexpected swoon. From a Hidden Pivot perspective, the downtrend would become impulsive on the hourly chart if it were to hit 1272.30 today, surpassing two 'external' lows.  Even so, we'd want to attempt bottom-fishing at the midpoint of the follow through leg. This is shown hypothetically in the inset. ______ UPDATE (2:39 p.m. EDT):  Gold's Comex handlers proved they're every bit a sleazy as DaBoyz who work the shares of Goldman, Google, Apple et al.  The non-news that the Fed will continue to pretend that it has leverage over the economy drove bullion quotes sharply vertical, but not before December Gold had foot-faked down to 1272.00, cannily trapping the bulls ahead of the short-squeeze that instantly followed.  The result so far is dueling impulse legs on the hourly chart and a moderately bullish bias going forward.  The 1290.90 target stands against a so-far high today of 1289.40.