October 2010

Assuming the December contract ultimately corrects down to our Hidden Pivot target at 1291.60, or perhaps even to 1278.70, we should remember that gold was down a whopping $15 on the day it was disclosed that QEII would be more like $200 billion than $2 trillion.  Thank heaven we were not privy to this information on Tuesday, since we'd have been sorely tempted to hock the family jewels to raise money to short precious metals with reckless abandon.  We'd also have been looking for a drop of $50 or even $100 in gold's price rather than the piddling $15 we got. For now, we'll continue to use the "soft" peak at 1358.90 to signal a resumption of the major bull trend, but otherwise the two targets given above will remain in play, the lower of them our very worst-case scenario for the foreseeable future.

It's discouraging to see the broad averages down so little when it appeared that the forces of sanity, decency and logic had bulls nicely on the run early in the session. Oh well. This vehicle ended the day with the creation of a strong impulse leg on the 30-minute chart (if not quite on the hourly), so we should brace for higher prices. If so, a midpoint resistance at 1180.75 should be considered "pivotal," since a breakout above it would portend more upside to as high as 1193.50. So far, however, the midpoint has with withstood the charge, turning the futures back from 1180.50.  Night owls looking for a way in should seek it on the one-minute chart, where subtlety and sideways tedium will have caused more than a few other traders to throw in the towel -- or doze off. ______ UPDATE (1:33 p.m. EDT):  Liftoff to a so-far high at 1187.50 came in the hour leading up to the opening, but the best time to have gotten aboard via camouflage on the one-minute chart was at exactly 4:50 a.m.  The pattern that took shape at that time is subtle perfection, including B and C coordinates formed from a single bar. 

The broad averages and bullion were being driven by news this morning -- soft speculation that the latest round of quantitative easing would amount to just a few hundred billion dollars rather than the $1Tr-$2Tr that had been rumored. Gold and Index futures were especially volatile as a result, and we had a ringside seat on the intraday charts to watch the action. This session also provides a good review of Hidden Pivot basics, since the room was packed with scores of observers who were guests of our broker affiliate, PFGBest.

Bullion and indexes futures were moderately lower early Wednesday morning, dragged down, evidently, by weak markets in Asia and Australia.  As of 2 a.m. EDT, there did not appear to be any compelling opportunities for night owls.

Yesterday's nasty selloff exceeded a clear Hidden Pivot midpoint support at 130^28 by 12 ticks, implying there is more downside to come over the near term.  The 'd' sibling of that number is 128^25, which we'll use for now as a minimum objective. (We should also allow for a bounce from 129^28, a Hidden Pivot support of less clarity.) If the futures do indeed fall to 128^25, it would refresh the downtrend on the daily chart, with bearish implications for weeks to come if not longer.

It's all been downhill following an early-evening rally spike that extended Tuesday's regular-session gains.  Unfortunately, the thrust died just short of some small peaks recorded early last week on the way down, thereby denying bulls the minor impulse leg that would have kept the rally going.  To avoid taking any unwarranted encouragement, we'll set a benchmark for today at 24.410, a tick above the peak shown in the chart.  Otherwise, the December contract would have to fall all the way to 22.345 today to hint of real trouble.

I was tempted to not update my guidance for gold, since there is so little to say at the moment. When Monday's high failed by two ticks to surpass the previous Wednesday's high, it created some minor short-term negatives in an otherwise bullish picture.  We've got haphazardly dueling impulse legs on the lesser charts, suggesting more turgid action ahead, so let's simply stipulate that the futures must print 1159.00 (our old friend again, the "soft" peak from the hourly chart) before we rouse ourselves to action.

Yesterday's action was just dawdling until the final hour, when the weakest of impulse legs popped up on the lesser charts. This obliges us to carry at least a faintly bullish bias into the fray today, although we needn't ratchet up the enthusiasm unless 1187.00 is decisively exceeded intraday, or better yet on a closing basis. That's the midpoint resistance of the pattern shown, and if it gets roundly thrashed we should infer that buyers are intent on 1199.75, its 'D' sibling. _______ UPDATE (1:06 a.m. EDT):  The futures were getting manipulated lower early Wednesday morning, targeted on 1172.00, or perhaps 1167.25 if it's breached. That second number would make a dandy place to go bottom-fishing were it not precisely coincident with a key low recorded last Thursday.

“Helicopter Ben” Bernanke took such a drubbing in the Rick’s Picks forum yesterday that we thought we’d jump off the beaten path to offer a few uncharacteristic words in his defense.  As forum regular Gary Leibowitz noted, going after the guy is “a natural emotional response during times like this. The frustration level is at an extreme. Rationally, how can anyone blame Bernanke for doing his job? There will never ever be a single person in such an important role that would do otherwise,” wrote Leibowitz. “Not a one. Imagine if you were placed in his position and actually had total control in implementing any and everything you think up. What exactly would you do different? Allow all the banks and financial engines to fail? Yeah that might feel good for the moment but what would be the result?” In our heart of hearts, we’d have to agree. Had we been chosen as “Easy Al” Greenspan’s ill-fated successor, we’d probably have made all of the same mistakes that Mr. Bernanke has made – even knowing full well that they were mistakes. We’d have bailed out the banks by taking all that bad mortgage paper off their hands. We’d have done whatever it bloody well took to keep the assembly lines rolling in Detroit and Dearborn. And we’d have doled out hundreds of billions of dollars for road projects, transit systems, lab equipment and teachers’ salaries. After all, what’s the alternative? Only One Remedy From a purely economic standpoint, there is and always has been just one remedy for the very dire straits we are in:  Let the economy crash, let the banks fail; and let every state, county and municipality fend for itself, even if they have to go bankrupt to jettison pension obligations that are guaranteed to crush as