May 2011

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Bullion futures were holding just below minor breakout thresholds, so night owls in particular should pay close heed to my numbers for Comex Silver and Gold.

Yesterday's price action looked like sleazy, skillful distribution, so let's try to adjust our position if the stock makes further progress toward a minor, 37.96 target.  We hold 300 shares against three June 40-May 38 puts spreads legged on for a 0.50 credit.  For today only, cover the short May 38 puts if they trade down to 1.20.  I may update this recommendation intraday, so be sure to check in if the stock is on-the-move.

A rally that earlier in the day seemed all but guaranteed to reach a minor Hidden Pivot at 38.950 has stalled, but not before punching past its 37.770 midpoint sibling by a decisive 20 cents. This is bullish for the near term, although buyers will need to take out the 37.550 midpoint of a lesser pattern to seize the advantage overnight.

In off-session trading, the futures have now stalled precisely at my 1513.90 midpoint target. Although a nearly $6 selloff has ensued, we should take encouragement from the fact that 1513.90 is exactly one tick higher than an important peak recorded May 5 on the way down. That means the finishing stroke to Monday's rally was impulsively bullish (see chart) and will remain so unless 1502.70 is exceeded to the downside.  For the moment, however, bulls are acting timid, allowing a minor rally pattern to carve out a lower point 'c' at 1507.30. If it survives, traders should use the 1512.80 high for camouflage, since its breach would portend more upside to the 1518.50 'd' target associated with midpoint resistance at 1512.90. _______ UPDATE (9:09 a.m. EDT):  While most of us were sleeping, the futures fell $13 after topping at 1519.30. The low so far has been 1506.40, but it'll take 1502.60 or lower to turn the lesser charts bearish.

The June contract is approaching a somewhat muddy Hidden Pivot support at 1.4187. Although I am not recommending bottom-fishing there because it is equal to an April 19 structural support, we should monitor the bounce thereof -- or perhaps lack of one -- for signs of power and of exactitude.  A resurgence of strength in the euro would of course diminish the odds that the US dollar has embarked on a major rally.

I've identified some bullish benchmarks in today's commentary, but let me do it here as well so that the precise numbers get archived along with previous DXY touts.  Although the rally thus far is impulsively bullish on the hourly chart, we should require an unpaused thrust exceeding the two peaks noted on the daily chart. (See inset.) They lie, respectively, at 75.81 and 76.43, and once the lower has been surpassed, the rally's strength and longevity will presumably be foretold by how easily the higher gives way.

It is moderately bullish that before this correction began, the Gold Bugs Index surpassed a midpoint resistance  associated with a target well above current levels, at 661.07.  That target will remain viable as long as the point 'C' of the pattern, 492.04, is not exceeded to the downside.  The midpoint itself lies at 576.56, and since it is now resistance, we'll need to see HUI close above it for two consecutive days before we infer that bulls have regained the upper hand.

Shorts initiated yesterday from near 1345.00 should be tied to a 1349.75 stop-loss. That is somewhat lower than the 1355.25 stop suggested here earlier, but it is also where the five-minute chart would now become menacing.  Please note that the lesser charts are already working on a minor, bullish impulse leg that yields a 1351.75 target and a midpoint at 1347.00. On weakness, the first high-odds spot to try bottom fishing would be at 1323.00. a Hidden Pivot on the hourly chart derived from the coordinates A=1354.00, B=1325.25, C=1351.75.