May 2011

Silver's rally tonight is somewhat more subdued than Gold's, but it won't take much of a push above the so-far high to generate an encouraging impulse leg on the lesser charts. Specifically, a push above the 35.165 peak-let shown would do the trick.  There's another at 36.950 that would reclaim the high ground for bulls, setting the stage for a strong upswing into week's end.

It's 8:30 p.m. EDT and the futures are showing signs of life, up nearly $20 on the last few five-minute bars. Something has lit a fire under buyers, but it is not apparent in the news, which is pretty turgid at the moment.  The so-far high of the move, begun earlier today from 1462.50, is 1489.10, but bulls will need to do a bit better, pushing the futures above the look-to-the-left peak at 1499.20 shown in the chart, to gain the advantage.

I've displayed the Dollar Index's dead-cat bounce on the weekly chart so that you can see it in proper perspective.  Is it conceivably the start of something big?  It's too early to tell, although I'll note that the surge failed by a whisker to push above a taunting external peak at 74.33 on the hourly chart. Look for that to happen today, but a little more will be needed -- specifically, a push above another 'external' peak at 74.48 -- to demonstrate the kind of pluck we associate with big beginnings.

At yesterday's lows July Crude was just an inch from creating a bearish impulse leg on the daily chart. This wouldn't necessarily be the beginning of the end for sky-high oil prices, and it could even set up a buying opportunity a couple of weeks down the road.  I've sketched this out in the chart, showing the hypothetical midpoint support where we would seek entry.  This price point would also be a reliable telltale to help us judge whether another major down-leg is likely.

The midpoint support shown in the chart lies in the middle of nowhere, so to speak, making it an attractive spot to try bottom-fishing with a stop-loss as tight as 1326.75.  If it gives way, try again at 1322.75, the 'd' target of a pattern larger than the one shown. ______ UPDATE (10:52 a.m. EDT): The futures dipped no lower than 1332.75 overnight, hinting that DaSleazeballs knew there would be bad economic news to run stocks higher when morning arrived.

Gold and Silver punished the faithful yet again on Thursday, demolishing the technical supports we’d thought would arrest the decline. The sturdiest of them barely evinced a bounce, a fact that telegraphed the onslaught that was to follow. How many more days of acute pain?  Not many, for sure, since Silver would be trading for under $10 by next mid-week if the collapse were to maintain its current pitch for just another few days. Now, our worst-case target for the July Comex contract is 31.520, although a bullish turn could conceivably come from a lesser support well above it, at 33.615. Both are Hidden Pivots, and the resiliency of the higher may help us to determine how likely the lower is to be reached.  With respect to Gold, we disseminated a 1451.80 target intraday for the June Comex contract. That number is an important Hidden Pivot support, and it looks sufficiently robust to contain the damage.  Although it lies $10.70 beneath Thursday’s bottom, it could prove to be just minutes away if sellers greet the day in the same despairing mood they were in yesterday. Using our proprietary technical method, we attempt to judge the strength of both major and minor trends by observing their interaction with Hidden Pivot supports and resistances.  It was on that basis that we hung out a yellow flag last Sunday night with this headline: “Comex Gold Closing on a Crucial Target”.  As of that evening, the June contract had gotten within a few dollars of a longstanding rally target at 1581.20 that we’d been drum-rolling for weeks.  In the actual event, the high occurred just beneath the Hidden Pivot, at 1577.40, but we were ready for it nonetheless.  Here is what we wrote at the time: “Technically-derived targets have kept us quite bullish the

Gold and Silver were getting savaged, so we searched diligently for clues concerning how long the correction might last and how severe it might be. We also took a close look at the Dollar Index, since the continuation of the dollar’s bear market would be a positive for bullion. Finally, we took a real trade in the E-Mini S&P, using the ‘d’ target of a corrective pattern. The trade worked, allowing us to take a partial profit and to secure the remainder of the position against risk.

I've gone out on a limb with today's headline, predicting a quick end to the correction in bullion.  Subscribers will have learned, however, not to chisel the numbers in stone. The analytical key, as always, will lie in observing how well minor midpoint supports and 'd' targets handle the selling.

There are numerous ways to target this downtrend on the lesser charts, but 38.490 looks like the first place we should look for a tradable bounce. Any lower, though, will bring into play the two numbers flagged in today's commentary -- 37.165 and 35.390 -- as well as a Hidden Pivot hitherto unnoted at 35.415.  It is the target of the pattern shown. Bottom-fishing at any of these pivots will be relatively risky, but they will retain the ability to warn of further weakness nonetheless. _____ UPDATE (3:39 p.m. EDT): Wow. Silver has collapsed 30% with barely a blip.  A tad overdone, I'd say. The March low at 33.615 is now the key support, the correction having already exceeded 0.618 of the rally from late January's 26.45 low.  A breach of 33.615 would create a bearish impulse leg of daily-chart degree, but it would take a strong rally and then a resumption of the downtrend to create the low-risk buying opportunity we await.