May 2011

I had assumed the printdown at 1516.20 was an error, but apparently not.  That means that Gold's selloff yesterday was bearishly impulsive on the hourly chart, but also that the June contract will have a chance to get traction at the 1517.20 midpoint of the pattern shown. If the support gives way easily, however, it would indicate more downside over the near-term to as low as 1487.40, the 'd' target Hidden Pivot with which it is associated.  Night owls should pay close heed, since it wouldn't take much of a rally to invalidate point 'c'.

DXY couldn't muster the feeble rally to 73.39 that would have turned the lesser charts bullish yesterday, so let's focus today on the 72.26 downside target of the pattern shown. It looks like a lock-up to me, so if you trade currencies, I'd suggest shorting there or at least exiting longs ahead of the dollar's expected bounce. ______ UPDATE (May 3, 8:36 p.m.): Three days spent screwing the pooch has turned the short-term outlook for DXY into a coin toss. Continue to monitor the 73.39 benchmark, since its breach will at least postpone the predicted fall to 72.26, and thence to 68.36.

The so-far low Monday night is 1353.50, the exact midpoint pivot of the pattern shown. Using the 5-minute chart, pivoteers can get long using camouflage on any impulsive thrust if the low has not been taken out.  If it's breached, however, you can infer the more downside awaits to at least 1345.25, the midpoint's 'd' sibling. It can be bottom-fished with a stop-loss as tight as three ticks. _______ UPDATE (8:17 p.m. EDT): From a recent high of 1373.50, the futures fell yesterday to an intraday low just two ticks from the 1345.25 forecast.  Officially we did nothing, however, since our bid missed by a hair.

Buyers of pretty much everything got sucker-punched yesterday when the markets opened exuberantly on the delightful news of Osama bin Laden's death-by-bullet-to-the-head.  It's going to take a day or two for traders' egregiously misplaced confidence to return, so don't be surprised if the broad averages meander till mid-week.

Silver and Gold got thrashed yesterday, the latter falling hard in off-hours trading after the June Comex contract surged to a record high Sunday night at 1577.40. We’d warned subscribers of a potentially important top at 1581.20, a target derived from our proprietary Hidden Pivot Method.  The actual peak came close enough to the target to suggest that a significant correction may be under way. We give the pullback a good chance to at least equal last winter’s correction, which saw June Gold fall from 1437 to 1310, or about nine percent, between early November and February. Silver, meanwhile, sputtered out well shy of an equivalent Hidden Pivot target north of $50, and it got hit much harder than Gold in percentage terms. At day’s end, the May contract had fallen as low as 42.190, down 15% from last week’s 49.820 peak and as much as $6 intraday. Whatever happens in the days and weeks ahead, we seriously doubt that the long-term bull-market in precious metals is in jeopardy, since none of the fundamental factors that have been driving bullion quotes higher have changed.  In particular, we expect Fed easing to continue until the dollar collapses, taking the financial system with it. As for the odds of European-style austerity taking hold in the U.S., it’s a non-starter as far as we’re concerned – about as likely as the Fed pursuing the strong-dollar “policy” that Geithner and his predecessors have been blathering about for more than a decade. Avoiding Stress… We use purely mechanical means to forecast the ups and downs of stocks and futures, and that helps us stay calm whenever the markets are said to be at the mercy of inscrutable or even violent forces.  For instance, if May Silver were to show some pluck at 42.37, a Hidden

The futures have gotten thrashed tonight, off as much as $7 so far from Friday's highs.  The move is strongly impulsive on the hourly chart, with downside targets on the one-minute chart of 39.435 and a 42.370 midpoint (see inset). We'll need to see how much support that last number provides before we can judge whether this is a routine shakedown or perhaps the beginning of an intermediate-term correction. The futures would need to reverse and hit 46.610 to turn the very lesser charts bullish again.  Because the downdraft has occurred as a response to bin Laden's death, nervous bulls should be asking themselves, "Has that really changed anything?"  More likely is that it will eventually heighten global terror, increasing the demand for gold and silver, since this will probably have been the busiest recruiting day al Qaeda has had since 9/11.  Under the circumstances, it is difficult for an adult to watch collegiate revelers outside the White House gates tonight without feeling a deep sense of foreboding. They evidently think that jihadists' so-far decades-long war on civilization is just Texas vs. Oklahoma.

Gold launched Sunday evening with an overly ambitious upthrust that has since been rebuked. However, even the low of the pullback so far is above Friday's highs, so I'd say the action looks healthy.  We are of course monitoring a potentially important Hidden Pivot target at 1581.20, but we should also be alert to the possibility that the downturn we're expecting could come from somewhere below it. So far, the high has been 1577.80, but it would take a correction down to 1523.80 to make the target-miss "official."  That's where a bearish impulse leg would be created on the hourly chart, and if it happens, it would be a warning signal that we could not afford to take lightly.

Gold and Silver are down sharply Sunday night on word of bin Laden's death, and so I've furnished benchmarks for each that can help us judge the severity of the selloff.  I've also identified the conditions necessary to signal a possible bullish reversal in the US dollar, but so far tonight there is not sufficient strength in it to account fully for bullion's weakness. Because the selloff in precious metals has occurred in response to the happy news concerning bin Laden, nervous bullion bulls should be asking themselves, "Will this really change anything?"  More likely is that it will ultimately heighten global terror and fear, and thus the demand for precious metals, since the upcoming week will undoubtedly be the busiest time for recruiting that al Qaeda has enjoyed since 9/11.  Under the circumstances, it is difficult for an adult to watch collegiate revelers outside the White House gates tonight without feeling a deep sense of foreboding. They evidently think that the jihadists' so-far decades-long war on civilization is just another Texas vs. Oklahoma scrimmage.

The Cubes fell just a whisker shy of a 59.46 target last week, but if we're going to lay out shorts, I'll suggest doing so at a more promising Hidden Pivot 61.58.  Use four July 61 puts, which I (very roughly) estimate will be trading for around 1.65 if QQQ reaches 61.58. The target is somewhat more ambitious than the 1371.00 pivot we'll be attempting to short in the E-Mini S&P, but I wanted to provide a bearish betting opportunity nonetheless for traders who prefer options to futures.  Camoflageurs should start looking for a turn as early as 60.93, the 'D' target that results if  you use the 51.88 point 'A' whence the rally took off. _______ UPDATE:   The little bugger never went any higher than 59.34.  Cancel the order, but we may try again later.