November 2010

At 4 a.m. Friday, Silver was threatening once again to blow the fur off bears. Today's analysis references two Hidden Pivot resistance points that you should monitor closely. There's also a rally target tied to one of them that is intended to stretch the bullish imagination.

Let's spare ourselves any ambitions in this vehicle today, since the minor-cycle ABCD rally begun yesterday left a gap that no bull could have traded. The presumptive finishing stroke projects to 1204.25,  but that Hidden Pivot resistance holds little promise for shorting because it lies so close to a 1205.75 peak from November 15 --  peak that seems likely to tempt breakout traders.

Silver did everything bulls might have hoped for yesterday -- did those things so well, in fact, that gold may find silver's upward pull magnetic over the near term.  While gold narrowly missed creating a bullish impulse leg on the hourly chart, silver created a robust one with the potential to reach 27.780 over the near term.  Please note as well that there is an important midpoint resistance between here and there at 27.685, and if it's easily brushed aside, bulls should take strong encouragement.  A close above it would put in play the 30.385 target of the large pattern shown in the chart.

For all of the exhilaration bulls may have felt yesterday, it must be noted that the rally failed by a potentially crucial point-and-a-half to surpass a key external peak at 1364.30. We'll give the bulls another chance today, however, since they were in the process of creating a 1366.00 target early Friday morning.  If it's reached, more upside to at least 1378.40 would become a safe bet.  That is the Hidden Pivot midpoint of the large pattern shown in the chart.

Technically speaking, Copper has taken a much harder hit recently than Gold and Silver.  Is this where they finally part company?  We could know soon, since the December contract is tracing out a downtrending abc with the potential to produce an analytically telling Hidden Pivot midpoint support. I've drawn a few hypothetical price bars to illustrate this in the accompanying chart. You should stay tuned in any event, since the pattern looks likely to develop in a way that could yield a low-risk entry point for bottom-fishing traders.

Readers of these commentaries will already know that I don’t like to go too terribly far out on a limb when forecasting bullion’s next leap. I’ve always preferred to forecast long-term trends one predictable step at a time – a cautious but reliable way of seeing things that has attracted many like-minded subscribers over the years. There have been times when this approach contrasted sharply with my dire outlook for the economy. In the late 1990s, for instance, the column that I freelanced to the Sunday San Francisco Examiner was probably the most bearish rant published regularly in a big-circulation newspaper.  Examiner readers would not likely have imagined that, on the guru side of my life, I was getting things consistently right in a stock-and-commodities letter that went out each day to professional option traders. I got it right because, rather than follow my instincts -- which, to put it charitably, stink --  I used coldly mechanical indicators. Contrast that with the shoot-from-the-hip showmanship of Mr. Bet-a-Million, my colleague Jim Sinclair.  Although his style and methods differ radically from my own, I have only respect for the man and for the way he has stuck to his guns on gold no matter what was happening in the markets. When an ounce was trading for around $1200 back in 2008, so certain was Sinclair that the price would rise to at least $1650 by this January that he baited doubters with a $1 million bet. Did he perhaps know something?  Of course not. No one could possibly know for certain where gold would be trading three years from a given date. But he did know – and never tired of telling us -- that the U.S. Government had embarked on the most reckless credit expansion in human history – a blowout

A recent graduate of the Hidden Pivot course, Paul Hoffman, has developed a regimen of exercises that he has found useful in honing his trading skills.  Here it is: I think it would be useful to the newbie and also to more experienced traders to design a series of exercises to get used to the Hidden Pivot Method.  Some of them you have already suggested and I am sure there are better ones than mine.  For most traders, and I include myself, the problem is not finding entry spots, but rather, trade management and follow-through with judicious, pre-planned stops and exit points.   Here are some of the training exercises I've been using:  Day 1:  Go thru all the charts, determining what opportunities, if any, each has to offer. This can be done by putting them in a directory, setting the display as images, and then using Windows to display them one at a time as a slide show.  Day 2:  Review the charts again looking for "big picture" ABCs  Day 3:  Review at least two weekly tutorials in the recorded archive  Day 4:  Using a tick chart or other low-level time frame:      -- Determine the current impulse and C-D legs.      -- Hypothetically initiate several trades at 'X'      -- Determine a stop-loss      -- Practice "time" stops, counting down 15 seconds from entry before re-setting the stop to avoid even a nominal loss      -- Allow yourself to be stopped out or to exit at 'P'  When I did this on a five-minute chart I netted $10 profit after commissions. The basic stop was a three ticks on the E-Mini  Day 5:  Repeat Day 3, but use only second signaled point 'x' entry prices after 'C' has been stopped out  Day 6 :   Repeat, except that instead of exiting at 'P', use a trailing stop from point 'P' and above  Day 7:   Repeat, using a dynamic trailing stop as

The futures were wafting higher Wednesday night, up eight points at the moment, but the gain was attributable more to a lack of supply than to any apparent buying enthusiasm. Under the circumstances, we should ask no less than 1195.00 before we take the rally seriously, since that's what it would take to create an unambiguous impulse leg on the hourly chart.  Because the current impulse is bearish, we might consider shorts seriously for the first time in a long, long while.

December Silver was threatening bears Wednesday night with impalement, poised at the base of a shallow, 20-cent cliff whose ascent would take the futures above no fewer than three external peaks on the intraday charts.  Gold, though less feisty, looked primed to follow.