August 2012

Gold rebounded from a Wednesday morning selloff and continues to grind higher toward a series of hidden pivot targets.  The first of these is the midpoint pivot of the pattern shown in the attached chart, at 1622.30.  This elegant pattern impulsed above an important prior high made last Thursday.  A short sale of the midpoint would be a risky bet on a false breakout above the more recent high of 1621.30.  The next price objective comes from the same pattern, its 'D' target at 1638.70.  This level has a lot of company in the way of prior highs and is also regarded as a risky short-sale.  The same goes for our next target, 1646.90, covered in yesterday's tout.  And finally we have a somewhat hidden pivot at 1652.80, which was discussed in Monday's tout.  In the event of an accurate reversal at the 1622.30 midpoint, a camouflaged buying opportunity might arise after the pullback.  (Posted by Doug “harry” McLagan)

Yesterday's projection caught the intraday low, 1390.50, precisely-to-the-tick. However, I'm not following through with tracking guidance because even though I'd suggested getting long down there, no one confirmed having done the trade in the chat room. Early Thursday morning, the rally was close to the 1403.25 target shown, but if it's exceeded the 1406.25 'D' Hidden Pivot of the even larger pattern shown will be in play. These numbers are tradable only by the very nimble, and so I'll leave it to camouflage-equipped night owls to find a way aboard if the opportunity should arise.

Index futures were creeping higher early Thursday morning toward targets that were too close to provide any significant opportunities.  Nonetheless, night owls can try to leverage either of two Hidden Pivots that I've flagged in the e-Mini S&Ps.

Anyone betting that the global financial system will continue to muddle along indefinitely deserves to reap the whirlwind that’s coming.  As the rest of us well know, the international banking system is being kept afloat solely by political lies, stupidity, corruption, greed and, most of all, egregiously misplaced confidence. It would seem to be only a matter of time before the rotted timbers of this belief system give way.  But what will be the catalyst?  The possibility or even likelihood that the financial system will be toppled by some event no one was expecting was the novel theme of Nassim Taleb’s widely read 2004 book, Fooled by Randomness.  In the New York Times, Taleb noted the following:  What we call here a Black Swan (and capitalize it) is an event with the following three attributes. First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable. In the seven years since Taleb’s book rose to the top of the bestseller list, any number of factors could have caused the banking system to implode but did not. Thus has the passage of time strengthened his thesis by challenging still-widespread expectations of a collapse “any day now.”  The possibility has not been negated, of course, but it seems increasingly unlikely that any of the well-known dreadnoughts that have been bearing down on us, including the Mayan calendar’s prophecy of the end of days, will terminate economic life as we know it. For in fact, the financial system has survived the de facto bankruptcy of Europe; a U.S. budget

Notwithstanding the problems of Europe and a global economy headed into apparent recession, the charts we looked at during this session say very clearly that stocks are capable of going much higher. This came through so clearly in the QQQ chart that we segued to a Dow chart just to make sure that we weren’t hallucinating. On the trading side, we turned the lesser E-Mini S&P charts inside out looking for immediate opportunities, and there were some good ones to be found.

To stretch the bearish imagination (and also the bullish one), I've included a Dow Industrials tout for today that references a rally target above 14000.  The pattern yielding that objective looks oh-so-plausible, and so we should keep it well in mind whenever grim headlines tempt us to think the world is about to end.  Click here if you’d like to try Rick’s Picks free for a week, including a chat room that draws traders from around the world 24/7.)

The QQQ chart looked so strong when we examined it during yesterday morning's tutorial session that we segued to the Dow's charts to see whether there were any corresponding signs. What we found was a quite plausible bullish pattern that projects to as high as 14142, a 7% rally from these levels.  Especially interesting is the apparent consolidation following a brief flirtation with the pattern's 13089 midpoint.  The Indoos are now above it, having seemingly broken out, and we should keep this well in mind before we attempt to intercept buyers with short offers.  I'll also note that the last ten or so bars of the chart shown yield a bull target projection of 13386, just above May's high.

The futures went into a shallow dive yesterday morning after failing to reach the rally target of a beautiful camouflage set-up.  This is "dueling" action at best, portending limited potential for traders on either side of the market. The best bet I can see at the moment would be going against the trend on a pullback to the 1598.60 midpoint pivot shown.  That's also a logical number for a minimum downside objective over the near term. Alternatively, we could get just a little bit excited if the futures pop today to 1626.80, exceeding the look-to-the-left peak that I've labeled.  That would strongly imply that the futures are bound for the 1646.90 bull target of the large pattern with purple coordinates.

The futures poked their snout within a few ticks of a lame target at 1404.00, but they apparently were too winded at that point to go for the gusto at 1409.00.  That's a Hidden Pivot resistance, and the more we scrutinized it during yesterday's tutorial session, the more appealing it looked. We'll continue to keep it well in mind for shorting if and when the futures get there, but for now night owls can attempt to make hay with the downtrend shown. Camouflage is suggested if bottom-fishing, since the correction target coincides with a prior low.  UPDATE:  The 1390.50 target shown in the chart caught the exact low of the day. If you got long at the bottom, please let me know in the chat room so that I can establish a tracking position for your further guidance.  Trading on our customary guidelines, you might have one contract remaining from each original four.   Click here for details concerning the upcoming Hidden Pivot Webinar in September (and a $50 discount coupon if you register now).