October 2011

From a Hidden Pivot perspective, yesterday's thrust in this vehicle was more impressive than the one considered in today's Silver Wheaton tout. Specifically, the Gold Bugs Index has already cleared an 'internal' peak -- one of two that must be exceeded to create a robustly bullish impulse leg on the hourly chart. (The second lies at 568.69. See inset.) It's a fly-or-die situation, since a failure to hurdle these peaks straightaway would leave HUI in technical Purgatory.

Silver Wheaton is within striking distance of an 'external' peak which if exceeded would signal the genesis of a powerful impulse leg with the potential to turn the intermediate-term picture decisively bullish. It lies at 34.61, exactly 1.70 points above the high of yesterday's spike.  In order to be valid as an impulse leg, the thrust would need to be unpaused (i.e., have no b-c correction) once the internal' peak at  33.02 is surpassed.  Rather than speculate, we'll wait for the stock to tell us whether it is ready to emerge from the woods.

A 1256.50 rally target came within two points of nailing the top of a nasty bull trap that saw the futures plummet 32 points overnight.  Most of the carnage came in the space of two hours; however, it would have been very difficult to get short at the top, since camouflage opportunities were nowhere to be found, even on the one-minute chart, when we reviewed the E-Mini's charts during yesterday's weekly tutorial session.  The rebound thus far has been feeble, and there's an unfulfilled downside target at 1214.75 that will remain valid unless the 1241.75 point 'C' of the pattern is exceeded to the upside (see inset). As a practical matter, however, bulls would regain the offensive with a thrust exceeding 1232.00, just four ticks above the so-far high as of around 1:45 a.m. EDT.

Rick’s Picks occasionally publishes opinions with which we disagree. The inflationist argument below, bullish on stocks but also on gold and silver, comes from our savvy friend Chuck Cohen. On stocks, at least, if not on bullion, Chuck’s scenario goes against our own expectations, since we’re looking for a global economic bust that would send shares into a steep dive before year's end. While this could also push gold and silver lower, we still expect precious metals to perform well in relation to all other classes of investables. Economic expectations aside, the broad averages have broken above the tedious sideways correction of the last six weeks, and the charts of many key stocks are undeniably bullish. There are also less-than-subtle signs that the Fed is eager to get QE3 under way with the explicit goal of pumping up stock prices.  Keep these things in mind as you read Chuck’s contrarian take on the markets – a follow-up to a piece he did two weeks ago that we disseminated to paid subscribers.  If you’d like to contact Chuck directly about his financial consulting services, or about mining stocks in particular, click here. RA] Following the recent move up in stocks, I want to update my piece of October 4 (A Bottom Is At Hand) by making some comments regarding stocks, and more importantly to the gold community, about the disappointing lag in the precious metals. First, the stock market. In just two weeks, while the media and most investors continue to dwell gloomily on the financial landscape, the Dow has recaptured almost 1400 points (13%.) Today we are closer to the April high than we are to the recent low. In fact, both the market behavior and the Dow chart are remarkably similar to those of last year at the bottom in August. (The

Assuming index futures continue higher on Tuesday, I've laid out a strategy for getting short at the expected top but have also suggested catching a ride north as prelude, since there was potentially 26 points of upside for the E-Mini S&Ps.

That was quite a move we saw yesterday, but was it the start of a sustained bull phase? Probably not, is my guess. Regardless, it could set up a fine camouflage buying opportunity, since the thrust was impulsive without having gotten past the obvious 9/27 peak at 3.4835 that others may be looking at. We'll wait for the pattern to develop further before we jump in, but if it should play out similar to the one shown, that could yield a low-risk buying opportunity. _______ UPDATE: The futures traced out a pattern unlike the one we'd needed to get aboard with little risk.  The move was impulsive nonetheless, yielding a bullish pattern with a 3.6120 midpoint pivot that we can use as a minimum upside objective for the near term.

Close, but no cigar. Like December Gold, silver futures narrowly failed to generate a robust bullish impulse leg on the intraday charts by exceeding a prior peak -- in this case, one at 32.150. If they should do so now, it would be less supportive of the bullish argument than if buyers had managed this feat on the first try. If weakness re-emerges, the first place where we could look for a bullish reversal would be at 30.930, the midpoint Hidden Pivot of the pattern shown.

Yesterday's thrust conspicuously failed to top a 1666.90 peak from a week ago, denying us the felicity of a fresh, bullish impulse leg. What this implies is that, even if an impulse leg should become manifest on the next push, it would not be destined for greatness. In fact, we'd need to see a surge that is unpaused between 1696.80 and 1757.90 before we infer that the punitive correction begun in the dog days of summer is over.  On weakness, look to do your bottom-fishing -- tightly stopped -- at the 1632.20 midpoint support of the pattern (240m): A=1666.90 (10/18), B=1604.70, C=1663.30.

The 1256.50 rally target given here yesterday remains valid as a minimum objective, but any higher and we'd probably be looking at 1271.50, at least. I'd rate the higher number a less risky short, and so I'll officially recommend doing so with a 1271.25 offer and a 1272.25 stop, one contract.  If you are schooled in the "camouflage" arts, however, I'll suggest getting long from here to 1271.25; and then reversing the position via a four-contract short from near 1271.50. If the expected top occurs during market hours, check back here, since I may update with a specific, detailed strategy in real time.  Want to learn how to nail swing highs and lows precisely, and to manage trade risk with a simple approach? Click here for information about the upcoming Hidden Pivot Webinar on November 16-17 and a $50 discount.