January 2011

Copper's most recent top came within less than two cents of a Hidden Pivot target that has been more than five months in coming, suggesting that the high may be an important one.  However, price action since has had the appearance of a consolidation, which if true would imply there's a thrust coming that will hit 4.6705.

Today's commentary spells out the bearish implications of a plunge exceeding 1317.40, but as I have tried to make clear, the downdraft must be unpaused -- meaning no intervening, upward abc corrections on the daily chart -- to truly threaten the intermediate-term outlook.  That said, more weakness to 1321.20, or perhaps 1313.10 appears likely, since the 1357.00 Hidden Pivot midpoint associated with the higher number has already been exceeded by 2.40 points.  Either of those hidden supports can be bottom-fished with a four-tick stop-loss.  Alternatively, a rally to 1393.00 would nullify the 1321.10 target, but we'll require no less than 1397.60 to ease the bearish look of the intraday charts.

Today's touts for the Dow Industrials and the E-Mini S&Ps project possible tops for the Mother of All Bear Rallies.  Only trouble is, the two projections would appear to be mildly out of synch if the Dow continues to rise 7.03 points for each ES point, as has been the case since the rally steepened in late December. I welcome alternative interpretations.

With a 1356.00 E-Mini S&P target in sight for the Mother of All Bear Rallies, I looked to see whether an analogous target could be identified for the Indoos.  Assuming they continue to rise about 7.03 points for each E-Mini point, that would indicate 12279.  However, when you work the visually obvious ABC price points on a chart of the same degree, you come up with a 12444 target.  You can double-check my math and assumptions, but all of the calculations appear to be correct. That means we'll simply have to live with the discrepancy and to look for the Dow to open up a lead relative to the S&Ps as both vehicles move higher.

A 1285.25 rally target is still valid in theory but too stale to use to get short. With the futures glowering at Thursday's peak following their obligatory short-squeeze rally in the final hour, it seems unlikely ES will pop to a merely marginal new high.  I'll recommend spectating at the opening, but if any opportunities develop, I'll try to signal them in the chat room in timely fashion.

Silver has breached an important midpoint support in off-hours trading and Gold is close to doing the same. The bearish implications thereof are spelled out in today's touts, which include intraday charts to illustrate.

I've identified an important midpoint support in Gold, but the picture looks slightly different in Silver because the pattern I've used to project a target starts with a rather well-defined one-off point 'A' (see chart).  One target or the other is likely to prove correct, but it is a bearish sign that Silver's 28.565 midpoint has already been exceeded (albeit by just four cents so far). Please note that a close beneath the support would portend more weakness over the near term to as low as 27.285.  Alternatively, it would take an upthrust to 29.910 to turn the intraday charts bullish. _______ UPDATE (11:23 a.m. ET):  The selloff has continued, overrunning the midpoint support. Expect it to continue down to at least 27.285, or to a maximum 26.895 if any lower. The midpoint associated with that last number is 28.370, so a rally to it should be viewed as a belated opportunity to get short via camouflage.

A day-long snoozefest featured the obligatory price hump early on in the session.  February Gold went on to peak at 1392.90 -- exactly $1.60 above the forecast high.  From there the futures have fallen sharply, and presumably gratuitously, touching a low of 1369.10 at 4 p.m. ET.  The key number for today is the 1357.00 midpoint support of the pattern shown.  If the futures close beneath it, that would be telegraphing more downside to as low as 1321.20, its 'd' sibling.  FYI, the 1357.00 target can be bottom-fished with a stop-loss as tight as four ticks off a 1357.10 bid. _______ UPDATE (11:11 a.m. ET):  The futures have come down hard, breaching the stop with a so-far low at 1356.10 that would have produced a theoretical loss of around $50.

In the chat room earlier this week, I recommended buying Feb 115 puts if and when DIA hit a rally target at 117.61. They spiked to 117.65 on Wednesday, so I will establish a tracking position of four puts @1.20 for your further guidance. (The low on the puts was 1.18). There were corresponding short recommendations in the E-Mini S&P, which fell three ticks shy of an 1185.25 target; and in the Mini-Dow (YM), which failed by 29 points to reach its 11759 target.  Concerning our put position, I'm going to suggest closing out two of them using a 1.42 offer, good-till-canceled.  Make it one-cancels-the-other with an order to close out all four puts at-the-market if they should touch 1.20 again. ________ UPDATE: We scratched the puts for no net gain or loss when the Diamonds began the day with renewed strength. The puts blipped very sleazily up to 1.36 on the opening, as put options in a bull market are wont to do, but that wasn't quite good enough to take us out at a profit. We'll continue to short every potential rally top simply because we can -- more or less painlessly.