Has the Mother of All Bear Rallies breathed its last? We think so, although if this proves to be the case the climax will have occurred in an odd place, technically speaking. Although we long ago ran out of fundamental reasons to look for higher stock prices, our focus solely on technical indicators suggested that the insanity still had at least a little further to go. Specifically, we were looking for the S&P futures to rise at least 56 more points before topping out in a big way. That would equate to a rally of approximately 400 points in the Dow. Gold and silver quotes also sharply reversed direction on Friday, rising from a similarly unexpected place. Although we’d called for a potentially important low at 1296.50 for the February Comex Gold contract, the futures appear to have made a bottom well above that number, at a 1307.70 price that wasn’t even on our radar.
Very clearly, it was news of the fiery upheaval in the Middle East that drove the markets wild. However, that shouldn’t have had any bearing on whether our price targets were reached. In fact, we’ve come to regard news simply as the catalyst that drives stocks to our “hidden pivot” targets. Under the rules of the proprietary Hidden Pivot System, if a trend reverses decisively without having reached a clear target, it is assumed the new trend will have legs — especially when this dynamic plays out on charts of degree above the hourly. Our conditions were not met on Friday, not quite, but it is probably just a matter of time before this occurs.
What to Look For
So what would it take to suggest that the steep moves that we saw on Friday — one potentially reversing a nasty correction in precious-metal prices, the other potentially terminating a stock-market rally that has gone on relentlessly for nearly 23 months – are harbingers of a dramatically changed environment for investors? In the case of the S&Ps, it would require only a further fall today or tomorrow of 14 points beneath the 1262.25 low reached by the mini-futures contract on Friday. We would want to see this confirmed by the Dow Industrials, however, and that would take a relatively larger decline of about 250 points from Friday’s 11823 settlement. As for Gold, Friday’s trampoline bounce carried the April futures contract an impressive $39 from its recent 1309.10 low. However, in order to signal the kind of rally that is likely to take the yellow metal to $1500 or higher, this initial “shot across the bow” would need to hit 1394.80. It doesn’t matter whether it takes two days, or a week or even longer to reach that number, but the final $15 of the ascent – i.e., from 1380.60 to 1394.80 — must occur without a discernible pullback on the daily chart.
Technicals aside, one reason we believe the renewed uptrend in gold will have staying power is that it has been decades since perceptions of a global crisis have significantly affected bullion quotes, as appears to have occurred on Friday. We can’t even recall the last time this happened, but it surely hasn’t been for lack of a good crisis. If investors are indeed becoming more skittish about the actual risks of a world that, already tilting off its in financial axis, has begun to destabilize geopolitically as well, then gold’s ascent from historic lows recorded more than a decade ago has barely begun.
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gold and silver respected everywhere but here…where the fools rule..what a song they will sing when the fat lady lets loose..guns,gold,GOD..amen