Last Wednesday, gold embarked on yet another rally that seems bound to disappoint. This one was a 60-pointer, and it came nearly precisely from the D target of the bearish pattern shown in the inset. An attempt to follow through bogged down at week's end, leaving the futures with no net gain over the initial, impulsive thrust. That said, we'll give bulls the benefit of the doubt nonetheless, predicated on a thrust through the 1686.50 midpoint Hidden Pivot of this pattern, which projects to as high as 1750.70. Thereafter, a pullback to the green line from our sweet spot between p and p2 should be bought 'mechanically' provided you know how to hold the entry risk down to less than $250 per contract. In the unexpected event that the rally exceeds D=1750.70, that would be the most bullish sign we've seen in a long while. It would bring into play a larger reverse pattern (a=1802.10 on 2/3/22) that projects to at least 1766.90, or 1911.50 at the outside. The foregoing notwithstanding, my gut feeling is that gold is about to relapse, eclipsing last week's low at 1622.20. Not far below it is a voodoo number where I'd try bottom-fishing, but I'll say no more about it until such time as the futures get there.
Bears appear to be struggling, so I've raised the downside target to a less challenging level by lowering the point 'A' high. The new target is 16.96, but there is no compelling reason to think it is likely to be achieved. We won't give up on it officially until such time as a rally exceeds C=21.02, but in the meantime consider the pattern spent for purposes of 'mechanical' set-ups, presumably on the sell side. _______ UPDATE (Oct 3, 6:38 p.m.): Today's sharp upthrust has brightened the outlook for at least the near term. The bullish reverse pattern shown here is a visual oddity, but price action over the last three weeks at p=20.08 implies that the 22.615 rally target is all but certain to be achieved -- probably precisely enough to warrant shorting there.
Last week's decisive breach of a midpoint support at 103.59 on the weekly chart implies that bulls have yet more pain to endure. TLT looks primed to fall all the way to D=86.48. The odds of this shortened when the breach was followed by a Friday close beneath the 'p' Hidden Pivot support. The abysmal target is congruent with my 4.9% forecast for rates on the 10-Year, which ended the week at 3.8%. A rally to the green line (112.14) might be seen by some as a hopeful sign, but from a Hidden Pivot perspective it would be a great opportunity to get short 'mechanically, stop 120.70. (Note: I am not featuring the 30-Year here because it has inverted relative to the 10-Year.)
November Crude is taking its time achieving a bearish Hidden Pivot target at 73.70 that has been a month in coming. Upward stabs have been brutal on shorts, making a sell-and-hold strategy impractical and unwise in retrospect. The downtrend has nonetheless triggered two mechanical shorts on feints higher if you count the one at the red line that was signaled last Wednesday. We don't typically initiate shorts at p, only at x, but this one would have taken a stop-loss at 84.33 if we had. That would have put at risk a third of what we stood to gain if CLX completes the pattern. It is sufficiently gnarly to imply that bottom-fishing at 73.70 with a tight stop-loss would enjoy attractive odds. _____ UPDATE (Oct 3, 6:50 p.m.): Tracking this dervish is mentally depleting, but we’ll still want to paper-trade the 'mechanical' short that would trigger if and when it hits X=85.65. I'd rate the trade a '5' -- a 50% chance to profit, and therefore not very enticing.
GDXJ bounced sharply last week off the target of a bearish pattern tracing back to April, so I am giving bulls the benefit of the doubt in this week's update. Because the fledgling rally has not yet created an ABCD pattern yet with a D target, we must use a reverse pattern to estimate the potential of the move. The rABC formation shown, with a 32.18 target, is the most ambitious available on the daily chart. I am comfortable using it, however, because Friday's upthrust blew decisively past p=28.99 and then closed above it. This all but guarantees the uptrend will continue to at least D=32.18. Note that a pullback to the green line would trigger an appealing 'mechanical' buy, stop 25.79. If the reversal went on to exceed two external peaks en route to the target, that would refresh the impulsiveness of the chart. As always, if a trend leg were to easily penetrate a D target, we would infer that a larger pattern is in play. ________ UPDATE (Oct 4, 11:42 p.m.): GDXJ slightly exceeded the 32.18 rally target I'd 'guaranteed' Sunday evening, retraced slightly, then pushed above an external peak at 32.20 before settling back a little. This is bullish price action but would become even moreso if the rally continues, exceeding yet one more 'external' peak at 32.75 within the next day or two.
[Louie Piro, my barber when I lived in Mountain View CA shortly before Google arrived, became a multimillionaire with a simple investment strategy. I thought of him the other day when a Rick's Picks subscriber wondered aloud in the chat room which investments are most likely to prosper in the recessionary hard times that Americans will soon face. The subscriber evidently favors the shares of gold companies that pay dividends. My own choice comes straight from Louie's playbook: Invest in utility companies that serve growing populations and that have good dividend histories. Thus did Louie's initial, $100 stake in a Nevada purveyor of water and power seed the wealth the haircutter was to amass over the next 50 years. Following is his story, as told in a column I wrote for The San Francisco Sunday Examiner 25 years ago. I have published it here before, but it seems more relevant than ever now, as investors try to figure out which stocks will be favored by the flight to safety that could come at any time. Louie's remarkable saga holds promising investment implications as we watch Californians, New Yorkers and other blue-state refugees flee economically doomed regions of the country for better lives in Florida, Texas, Utah, Tennessee and a few other states that are not so heavy-handed in the way they regulate businesses, schools, commerce and free speech . RA ] If there is a single word to sum up the success of investor Louis Piro, that word is "dull." Piro has never made a killing on a stock. He doesn't play hunches and he runs from hot tips. He says he passed up Pfizer not long ago because its shares were too pricey even before impotent men started flocking to their Viagra pill for a cure. Nor will Piro
The Dollar Index peaked on Friday seven cents above a 113.16 target that has been on our radar for more than four years. The pattern took nearly a decade to play out, implying that any correction from these levels could last for quite a while -- perhaps 12-18 months or even longer. The retracement presumably would set the stage for a renewed uptrend to the 119.37 target shown in this chart. Please note that although a severe correction down to the green line at 96.03 might be viewed by pundits as nothing less than the death of the dollar, it would in fact trigger an opportune 'mechanical' buy signal according to our trading rules. Because the dollar's daily ups and downs have correlated inversely with nearly every trading vehicle we track, we might expect a resurgence in gold, stocks and T-Bonds, among other investibles, if the dollar is in fact headed into a prolonged decline. There's also a chance it will power its way past the 113.16 target without a pause and just keep rising. That would suggest that the catastrophic deflation we've been predicting for many years is under way. A hardening dollar would tighten the screws on all who owe dollars, including debts arising from short-dollar positions in the $2 quadrillion derivatives market. _______ UPDATE (Sep 27, 5:11 p.m.): Amazing! DXY hasn't quite shredded the granite Hidden Pivot at 113.16, but it does look like it's trying to turn the resistance into support. This implies there is still plenty of unspent power pushing the dollar higher. If so, that would be very bad news for the economic world. ______ UPDATE (Sep 29, 11:28 p.m.): DXY has corrected sharply for the last two days after exceeding the target of a long-term pattern. If the retracement is going to be
Only in a child's fairy tale book -- a punitively boring fairy tale book, to be sure -- would the December contract have made a major bottom three points above the June low as could conceivably have occurred on Friday. A more painful test of the low will likely be required, implying it will have to be breached, even if only to rebuke Jim Cramer and frighten the large TV audience that would have taken him literally when he guaranteed a couple of months ago that June's 3657.00 bottom would stand more or less forever. Unfortunately for his fan club, based on the way the downtrend crushed the midpoint support at 3853.50 last week, I would expect the futures to fall to at least p2=3607.38 before they can turn around, or more likely to D=3361.25. This is somewhat at odds with the bullish glimmer of hope for the S&Ps that I've provided elsewhere on the page in my analysis of the Dollar Index (DXY). On Friday, it precisely achieved an important rally target that has been 13 years in coming. If the dollar is therefore about to enter a corrective phase, it seems logical that just about everything else will reverse and move higher. That's because for months nearly everything has fallen in lock-step with the dollar's rise. The inverse relationship is so tight that it can be seen even in intraday feints, jiggles and jaggles. We should know by later in the week whether the relationship will hold, so stay tuned. _______ UPDATE (Sep 27, 5:18 p.m.): I still like the prospect of a (very) tradeable bottom at 3607.38, the minimum downside target we've been using, but I'd have to concede that it's possible the turn will come from today's low, 3635.25, for reasons this chart makes clear. It
Friday's close beneath p=150.80 has shortened the odds that the 142.85 target we've been using as a worst-case number for the near term will be achieved. A further fall to at least p2=146.82 appears likely in the meantime, while a rally to p=154.77 should be used to get short 'mechanically'. I will provide more-detailed guidance in the chat room if prompted by your timely interest. If the trade were to be executed conventionally rather than with a 'camouflage' trigger, this gambit carries about $1600 of implied entry risk, based on four round lots and a stop-loss just above 'C' at 158.75. ______ UPDATE (Sep 27, 5:09 p.m.): The short I explicitly advised above would have been worth at least $1500 to any subscriber who did as suggested. The stage-managed, powerful short squeeze on the opening bar fell a nickel shy of p=154.77, but in practice that would not have made a difference if you used the usual reverse-pattern trigger. The bearish pattern has been working perfectly and the 142.85 target still obtains. ______ UPDATE (Sep 28, 10:22): A further rally to the green line (x=154.84) would trigger a moderately appealing 'mechanical' short, but if it's hit soon we'll want to be cautious about intercepting such a wicked spike. _____ UPDATE (Sep 29, 11:49 p.m.): We saw yet more evidence today that the stock's handlers have not yet acclimated to the fierce selling that is sinking their favorite stock. This morning they tried a trick they've repeated successfully many scores of times, pulling their bids on the opening bar in order to dry up the selling. This tried-and-true tactic succeeded briefly, but only because the 142.85 Hidden Pivot support given above precisely contained the initial plunge. But it gave way after a couple of hours under a barrage of selling, and even a
The chart provides precise targets at 103.06 and 95.85 , respectively p2 and D, in lieu of one previously given here at 101.16 that was based on a possible test of lows recorded back in 2013. The higher number looks very likely to be achieved, given the way the C-D leg gapped down through p=108.27 the first time it encountered it and then turned it into upside resistance. It also makes a worst-case plunge to D, if not inevitable, then certainly thinkable. _______ UPDATE (Sep 28, 10:26): That was quite a rally. It came from pennies beneath the 101.16 low mentioned above, and it will very probably need to be tested. However, bulls would gain the upper hand for a rare change if they can push above 108.21 this week or early next. That's where a shelf of highs was made last week.
