August 2012

Until someone asked me to take a look at Silver Wheaton during yesterday's impromptu webinar/trading session, I had barely looked at the stock in months.  Lo, yesterday's bull-trap rally breached a key May peak before subsiding, creating one of the most promising impulse legs we've seen in a while.  For the technical details, check out the chart that accompanies today's SLW tout.

Encouraging, to say the least.  Monday's modest spike on the opening bar may not look like much at first glance, but if you let your eyes travel west you'll see that it exceeded a key peak at 31.03 recorded back in May, creating a bullish impulse leg on the hourly chart.  The stock has fallen back some since, but the pullback low is still three cents shy of the 30.34 print needed to turn the bullish signal into a dueling muddle.  Even then, however, odds will still favor bulls, since they required barely any pullback for the running start that bettered the May peak.  A buy recommendation at the moment seems a bit premature, notwithstanding the fact that I haven't much looked SLW since May, when I tuned it out altogether. Last week's $2 gap-up, sneak-attack rally was my comeuppance, though -- just the way a stock is supposed to move when it wants to screw erstwhile or inattentive bulls out of entry opportunities.  I am attentive now, however, and ready to jump on the stock if a situation arises where entry risk is down near-zero.  You can learn how to do this stuff yourself — and more easily than you might imagine.  Click here for a free trial subscription.

GDXJ is selling off  without having quite reached a middling rally target at 20.81 (see inset).  This has mildly bearish implications for the near term, but we can nonetheless try bottom-fishing with tight stops, since the bigger picture still looks promising. Accordingly, I'll recommend bidding 19.64, stop 19.56, for 400 shares. As you can see, our bid lies four cents above the 19.60 D target of the minor corrective pattern shown. (There are alternative abc corrective patterns, but I'm trying to keep it simple.)

On paper, we're short two contracts -- effectively from 1413.00, since we covered two for a partial profit at 1405.00. For now, use a fixed stop at 1408.25 for one of them, and at 1411.50 for the other. On a one-cancels-other basis, you should also cover a third contract at 1391.00. Overall, this strategy for risk management lies somewhere between "swinging for the fences" and getting out with at least a small profit no matter what. One reason we are not going for broke on this one is that my big-picture forecast allows for a Dow rally above 14000.

Yesterday crude oil confirmed an elegant new pattern that points to new three-month highs.  The midpoint at 95.61 is near another Hidden Pivot, at 95.49, as described in the August 10 tout.  As we mentioned then, if oil can rally decisively through the $96 level, it would be on its way to 102.39.  We can now add 99.51 as a price objective and possible resistance level, as this is the 'D' target of our new pattern.  Traders who doubt oil's bullish potential should watch the 95.49 - 95.61 area for shorting opportunities.  (Posted by Doug “harry” McLagan)

Monday afternoon's twelve-dollar dive in the gold market projects as low as 1603.00 if the market follows through.  The plunge was just in time for the daily settlement and looked a lot like a stop-sweep by the usual suspects.  It ran parallel to Friday's bullish "wall" and did only limited technical damage to the charts.  That would change, however, if the futures reach the 1603.00 'D' target, which lies below three very prominent lows ranging from 1608.10 to 1605.90.  An alternative 'A' point for the pattern, at 1628.20, would project as low as 1597.70.  Neither of these patterns is active yet, and they share a 'C' point at 1616.20.  Both 'D' targets are well hidden, but neither midpoint is.  If the futures push the 'C' point higher, as all Hidden Pivoteers know, the targets will move with it, so have your calculators ready.  (Posted by Doug “harry” McLagan)

It wouldn't take much to trigger off a bullish spree in Comex Silver, but until such time as the September contract meets a simple technical requirement, the burden of proof will remain with bulls.  For further details and a chart that illustrates exactly what must happen, check out today's touts  (or click here for a free trial subscription to gain access to all features, services and the Rick's Picks chat room.)

September Silver is flirting with a potent, bullish trigger in the form of the 28.080 midpoint pivot of the small pattern shown.  A near-miss is as good as a mile, and so we'll stipulate that the futures must close above it before we infer that the rally will complete to 28.470, its 'D' sibling. The larger ABC pattern yields a somewhat higher target at 28.640, and although the 27.760 midpoint with which it is associated has already been exceeded on a closing basis, the heaviness of this vehicle since then has placed the burden of proof on bulls for the time being. You can learn how to do this stuff yourself — and more easily than you might imagine.  Click here for a free trial subscription.

[In the guest commentary below, Erich Simon sees Quantitative Easing as the death rattle of the U.S. economy. Americans will be taxed just to stay afloat as the financial system edges toward a seemingly inevitable day of reckoning. And although the gold coins you’ve socked away will probably be easy to barter in very hard times, they will not save the day for a global economy that can be brought back into balance only by a violent wrenching of the gears. RA] In the good old days, before Quantitative Easing was used to “stimulate” the economy with printing-press money, bank loans were invested with the goal of producing sufficient profits to retire the loans. Sound investments produced profits, and society advanced -- both fundamentally through the creation of new businesses; and economically as a result of new jobs created and the wealth-multiplier effect. Money remained sound, and its desired property as a store-of-value was affirmed. But we are no longer in a growth economy. Rather, the economy is akin to a mature and declining product life-cycle. We have squeezed the final drop from the last technological apple plucked from the tree of the Industrial Revolution. The Green Revolution is similarly over, leaving behind state-sized swaths of barren, cracked and salt-encrusted clay, growing nothing more than the next generation of genetically modified Soylent Green. Inventions like penicillin have all been fully exploited. The latest medical breakthroughs, to fight cancer mostly, consume prodigious resources. The dot-com boom was the grand finale, an essentially frivolous exercise in non-productivity masked by its supposed social “contribution.” After the predictable March 2000 crash, the winds of deflation began to blow, so that we now find ourselves in the throes of a terminal unemployment hangover. Today, we are a crowded, resource-depleted quagmire, a sea of unproductive participants