January 2011

So pathetic was the buying interest yesterday that the miserable rally it spawned could not achieve its very modest Hidden Pivot target in six hours of trying. That target, to remind you, is 1292.50, and nothing that occurred in yesterday's banana slug-fest has invalidated it. In keeping with today's 240-minute-chart lollapalooza, I've reproduced one here to show how plausible is the previously given target at 1305.75. That's my minimum price objective at the moment -- a weigh station enroute to a more important Hidden Pivot at 1356.00. More immediately, night owls can try bottom-fishing at 1275.75 if 1289.75 has not been exceeded to the upside first.  That's the midpoint support of the pattern (60-min) A=1295.50 on January 19; B=1267.50 on January 20; and C= 1289.75, recorded yesterday. _______ UPDATE (11:52 a.m. EST):  Surprise surprise surprise.  After topping overnight at 1191.75, three ticks from our target, it's been downhill. The so-far low at 1278.50 is useless for our purposes, however, since it is equal to yesterday's lows.

Silver's 240-minute chart -- Doug 'Harry' McLagan's favorite point of view in the charts he posts in the chat room -- differs from Gold's in some key respects, but the possibilities are few enough that we needn't dither in saying what is most likely. The most compelling downside target lies at 25.540, a Hidden Pivot, but its sibling midpoint at 26.745 seems all but certain to engender a tradable bounce. If not, and March Silver crashes the support, that would lend weight to the 25.540 target itself as the final low for this now three-week-old correction.  More immediate, and potentially useful for night owls, is an alternative low at 26.655 that can be bottom-fished with a stop-loss no wider than five ticks.  Its obscure provenance is shown in the chart, which turned out a little more dense with coordinates than I would have preferred.

The 240-minute chart that Harry favors and which he displays to good advantage in the chat room yields a 1321.20 target that's hard to argue with.  There are a couple of other target just above 1322.00 that come from lesser patterns, but the one at 1321.20 could be bid speculatively with the tightest of stop-losses. Ideally, however, bargain hunters should use camouflage on the lesser charts to get long down there.  Start looking at around 1323.00, down to as low as 1320.40.  My gut feeling is that we'll see a tradable bounce from somewhere in that range but that it will not mark the final low for the correction begun late last year from just above $1420.  A 1296.50 target can be tortured out of the chart I've furnished, and its abc provenance is shown in red.  Because the pattern yielding that target is so visually un-intuitive, and because the breach of $1300 would touch off a minor panic, I'd categorize 1296.50 as a back-up-the-truck price where February Gold could -- and should -- be accumulated aggressively. ______ UPDATE (3:43 p.m. EST): This morning's low at 1221.90 gave way to a nearly $13 rebound, validating the analysis and strategy given above.  However, as a practical matter, camouflage entry would have been quite tricky, since the first valid signal, flashed on the two-minute chart, yielded a rally leg that died after touching the midpoint pivot.  The next entry opportunity came at around 8:30 a.m. and would have required the nimble execution of a buy-stop, since the trigger to get long came on a trampoline bounce from point 'C'.  The failure of the futures to turn decisively from the Hidden Pivot supports we were monitoring suggests more weakness is likely. 

We’re still not sure whether CNBC was making a joke or simply advertising its ignorance with a recent headline, “Accounting Tweak Could Save Fed from Losses,”   This was a tweak about as subtle and ingenuous as Bernie Madoff’s balance sheet.  What the central bank did was revise and advantage its own rules so that if some financial catastrophe were to inflict huge losses on the Federal Reserve System, the U.S. Treasury would take the hit, not the Fed itself.  Oh, and taxpayers needn’t be concerned about the presumptuousness of this coy arrangement, since the changes provide for the Fed to pay back the losses with future profits.  Do we really need to point out to CNBC et al. that any such profits would have to come almost entirely from…interest income on Treasury bills, bonds and notes held by the Fed? Who would have believed that the nation’s banking system would one day be powered by the feather merchants’ version of a perpetual motion machine, or that the bulk of America’s liquid “wealth” could be stored on a few computer chips no bigger than a piggy-bank’s snout? As we now know, all it takes to pull off this scam is a credulous press, an ignorant Congress, and central bankers so cynical that they actually believe the public is too stupid to understand what’s going on.  Thus is Helicopter Ben able to say with a straight face: “Under a scenario in which short-term interest rates rise very significantly, it’s possible that there might come a period where we don’t remit anything to the Treasury for a couple of years. That would be I think a worst-case scenario.”  Hello!!!!  Are we actually supposed to believe that the day this Zimbabwean twist on quantitative easing is announced, that it won’t send the dollar into

In the wee hours, the E-Mini S&P has stalled at the exact midpoint of a minor ABCD rally.  This implies that any progress above it would make the futures a good bet to reach the target itself.

The corrective pattern shown in the chart suggests AAPL could turn from the midpoint pivot, 325.50; but if not there, from the 'd' sibling at 318.60.  We can try to leg into a bullish butterfly spread if the lower target is reached, but for now, let's take a practice shot by bidding 325.54 for a round lot, stop 325.31. This stock can really move, so be sure to put your stop in before you bid it.  As implied, a decisive breach of the midpoint would tip the short-term bias negative. _______ UPDATE 11:07 a.m. EST): I've corrected the chart, which contained an erroneous point 'C'.  The new coordinates slightly lowered the target and the midpoint.  The former is still in play, but the latter has already been breached after initially having provided a fairly precise bounce overnight. Most immediately, there is a minor rally in motion that projects to 334.60.

Two patterns nicely visible on the 30-minute chart -- one small, the other large -- project to rally targets at, respectively, 1.3674 and 1.3789.  A bullish bias is suggested as the futures work their way toward these numbers, but either can be shorted with a stop-loss as tight as six ticks. ______ UPDATE (12:51 p.m. EST): The upthrust we were expecting carried to 1.3680 before settling back, but longs had plenty of time to implement a trailing stop to protect gains. Shorts from the target would be ahead at the moment if they used a stop-loss of seven ticks or more, since the high occurred exactly six ticks above the pivot.

It's about 3:22 a.m. Monday morning, and the March contract has stalled at the precise 1285.25 midpoint of a rally pattern projecting to 1292.50.  Above that number, especially on a closing the basis, the futures would be indicating 1305.75, the 'D' target of a pattern begun from 1258.00 on January 10.

The futures were working on a promising impulse leg around 2:40 a.m. Monday, but in this case I'd prefer using Fibonacci levels rather than  pivots to assess their progress, since the minor abc rally is likely to be spent by morning.  Specifically, a close above 28.280, representing a 50% retracement of the decline from last Wednesday's 29.490 high, would imply that bulls are fixing to take charge, at least for the near term.  More bullish still would be a move above the 0.618 Fib level, 28.570.