November 2010

Monday through Thursday, join me for a live pre-market look at bullion, index futures and whatever else is interesting in order to develop a trading plan for the day, particularly the opening hour. The focus will be on Hidden Pivot support and resistance points that show the most promise for trading with as little risk or stress as possible. Click here to register for these sessions.

(This week, Rick’s Picks will be featuring commentary from some forum regulars who for the most part are mad as hell and not going to take it any more. Today’s commentary is from Tom Waldenfels, a former broker and semi-retired management consultant who goes by the handle “fallingman” in the forum. Tom is skeptical, to put it mildly, that the recent election is going to change things. If the voters want real change, he says, it can only begin  with changes in the way they conduct their own lives. RA) I’m writing this essay a few days prior to the election, but I already know how the vote’s gonna turn out.  The new Congress will be composed of ... pause for dramatic effect … Republicans and Democrats. Doh! “Meet the new boss … same as the old boss.”  We just got fooled again. Yeah, the balance will have shifted some and many of the newcomers are unquestionably more honorable human beings than the people they’ll be replacing.  How could they not be?  But, as Doug Casey says, “Political power tends to attract the worst people … the four percent of the population that’s sociopathic.”  It ain’t like the Congress is goin’ all Jimmy Stewart on us.  We’ll be stuck with essentially the same crew and pretty much the same “leadership” in both parties that we’ve had, rump movements notwithstanding.  And how’s that arrangement been workin’ for us?  As we say in the south … “Not too good.”  Rome will continue to burn. Corporatism will continue to rule the day.  Promises will continue to be made that can’t be kept.  The Constitution will restrain no one.  Borrowed and newly conjured money will continue to be wasted on everything ranging from the merely idiotic and counterproductive to the truly criminal and completely

Our friend Vronsky, founder of www.Gold-Eagle.com has used the "Rule of 7" to project some very interesting bull-market targets for five widely followed investment vehicles, including gold, silver, crude, the U.S. Dollar and the Gold Bugs Index (HUI). Some of the projections will astound you, such as crude oil at $415 per barrel; but for gold, his most immediate price objective is $1532; and thence $1957, followed by $2907. Click here to access his complete set of forecasts, including calculations.

I've avoided effusing over the weekly chart because it projects to 30.005 and I didn't want to get everyone stirred up about it, at least not before today.  Now is a good time to stretch our bullish imaginations, the moreso because real bulls take $50 Silver, eventually, as an article of faith -- and what can it hurt to view $30 as being in-the-bag? I'll add the target to our matrix of possibilities. Keep in mind, however, that the futures will need to get past a midpoint resistance at 26.425 to make the higher target a high-confidence number.  That's just 5.5 cents above yesterdays high, and it deserves to be watched closely.  If the futures blow past it effortlessly today, we can be confident that 30.005 will be reached.

A feisty charge after-hours has lifted the futures above the ostensibly daunting peak at 1388 recorded on October 14.  In all of human history, that was the highest price for which an ounce of gold had ever traded.  And so we must infer that the good guys were feeling pretty confident when they decided to take on a millennial peak at a time of day when most U.S. traders were headed to dinner.  The move so far has reached 1394.40, and although that's 12 bucks below the 1406.70 target we've been using as a minimum upside objective, it seems a foregone conclusion that buyers will put the finishing stroke on the rally before trading opens in New York Friday morning. I've extrapolated yet one more target from the pattern -- 1427.50, and it looks sufficiently compelling on the hourly chart (see inset) to use as a new minimum for the bull cycle begun on September 28.  Please note with traderly caution, however, that 1400 may prove to be other than a piece of cake.  For one, it represents an important round-number resistance; and for two, 1400.80 is the D target of the following pattern on the weekly chart: A=882.30 (4/17/09); B=1234.90 (12/04/09); and C=1048.20.

Let's not make this romp to Dow 35000 too terribly easy for the bulls and their evil masters on Wall Street. Note in the weekly chart that although yesterday's rally spirited the Dow into solidly impulsive territory, there remains an unconquered peak-along-the-wall going back to August '09 that implicitly challenges the herd's daring.  It lies at 11867, and we should stipulate that the Indoos must exceed it before we cast our lot somewhat wholeheartedly with imbeciles, the foolhardy and, ultimately, with wild-eyed speculators.  We should also require that the rally be unpaused (i.e., no 'a-b' pullbacks along the way) on the weekly chart until it gets past our benchmark. For now, though, no discrete portion of the endless stretch of rally from the March '09 low can be treated as an impulse leg, since none of the three visually evident segments surpassed the required two prior peaks. In fact, the only impulse leg we have to work with to project higher prices is the uncompleted one begun from  9937 on August 27.  Since it has yet to terminate, we cannot say much about how high this suicidal climb will go.  But as noted above, it would significantly increase the implied power of the move if the Dow were to keep chugging higher, surpassing 11867 with nary a b-c pullback along the way.  Take a look at the chart, since it greatly simplifies what I've said above.

(Wow!  Are we getting rich already, or what!? Yesterday's 219-point rally in the Dow was a windfall downpayment on the "wealth effect" that Ben Bernanke's latest gift to all humanity is supposedly going to create. For our part, we're doing our patriotic best to spend every dime of our anticipated share of QEII, pulling our sons out of the horrid public school system and enrolling them at Le Rosey. We've also put a good-sized chunk of change down on a candy-apple red Veyron,  although it set us back an extra $75k to bump a few Hollywood types down the waiting list.  Because the commentary below attracted a slew of great responses in the forum – see, for one, Roger Erickson’s post on how QEII does not actually create money -- we're running it for a second consecutive day.  To those of you who are taking the Hidden Pivot Webinar, see you tonight in class...  RA) The Dow finished up a measly 26 points the other day on word of that the Fed plans to "buy" $800B of Treasury debt over the next eight months. The news caused pundits round-the-world to breathe a nervous sigh of relief.  The turgid action in stocks was taken to mean that there were no surprises for investors: not in Tuesday's election results, which saw Republicans take solid control of the House of Representatives, though not the Senate; not in President Obama’s subsequent press conference, which appeared to have cracked the door open ever-so-slightly for compromise on Obamacare and cap-and-trade; and not in the announcement itself that the Fed is about to rev up the money supply at a prodigious rate.  Could it possibly get any better than that? We ask the question facetiously, since anything one might find to like about the day’s major news events could be spun negatively. We’ll concede nonetheless that the Republican landslide in the House is probably

I'm going to interpret this vehicle's immediate prospects as conservatively as Hidden Pivot rules will allow, paying close attention not to the big picture, but to the small one as defined by impulse legs on the daily and hourly charts.  Right now, on the daily, the futures are in the process of forming an impulse leg that could eventually generate a follow-through C-D leg of as much as 26 points.  It could be far more powerful, however, if buyers vault 1208 today, since that would open a path to a 40-point rally after this one has corrected.  The accompanying chart shows the narrow segment of price bars that are relevant at the moment.  By applying the rules rigorously, I aim to avoid getting fooled at this very crucial threshold, and to never be "wrong" about the trend for more than an hour or two.  The accompanying chart shows subtleties that can only be explained with a very lengthy text that would bore you to tears.  I have reproduced it nonetheless so that experienced Pivoteers can get immersed in the logic of it.  I warned here earlier that bears had better prepare to hibernate if 1196.50 is exceeded, as has occurred. However, I am unwilling to give bulls the benefit of the doubt unless they earn it, and even though QEII may turn out to be a catalyst for Dow 20,000, however implausible that may seem.

Yesterday's wild ups and downs may have frightened the horses, but they should not have rattled long-term bullion bulls one bit.  I've provided a chart in Silver that may come in handy for camo-savvy night owls, but Gold appears not to have left any such useful handholds.