Silver's rally has come from a promising place, a hair beneath a 'secondary' Hidden Pivot at 18.06. This has provided the kind of high-octane boost we've come to associate with reversals at p2. I've used a modest rABC pattern nonetheless to project a 21.29 target somewhat more challenging than the one at 1788.90 in December Gold. The target looks all but certain to be achieved, given the fist-pump past p=19.66 last Thursday. The pattern can be used to get long 'mechanically', most obviously via a swoon to the green line (18.84). If 21.32 is eventually exceeded, especially decisively on first contact, I'd raise my sights to 23.20, a 'D' target derived from the large reverse pattern begun from 22.14 (labeled 'a' in the chart). Please note there is a midpoint resistance at 20.60 associated with that last target, and a precise pullback from it would validate the pattern itself if not necessarily ensure that 23.20 will be achieved. _______ UPDATE (Aug 3, 4:25): The rally missed 20.60 by 9 cents -- not quite close enough to validate the pattern and target, nor to set up a high-confidence 'mechanical' buy if the relapse hits x=19.30.
Much as I'd like to put the knock on last week's rally, it actually looked pretty good -- real, almost. In the reverse pattern shown, buyers showed no awareness whatsoever of what we might have viewed as daunting resistance at p=32.44. Thursday's gap through it all but guaranteed a finishing stroke to D=35.99, but we'll need to see how buyers handle this Hidden Pivot before we literally buy into the likelihood of a move into the wild blue yonder extending up to early June's 42.19 peak. This suggests imminent weakness in energy prices that have been holding mining stocks down, perhaps even moreso than the strong dollar. _______ UPDATE (Aug 3, 4:30 p.m.): A pullback to the green line (x=30.66) would trigger an appealing 'mechanical' buy, stop 28.87.
The A-B leg is sufficiently compelling that we can infer rates on the 10-Year Note are on their way down to at least 2.49%, a hair beneath the psychologically important 2.50% level. That would be a good place for a pause, but it is more likely that we'll see a bounce. It's too early to tell whether this would be the start of a strong, bullish reversal, but if so, it holds bullish implications for the big banks, if not for other sectors of the U.S. economy. Alternatively, if D=2.49% is easily penetrated, it would imply ore slippage down to 2.30%, or even 19.10%. Both targets come from a reverse pattern on the monthly chart.
I'd advised against bidding 'mechanically' at the green line if September Crude should revisit it, but Friday's impulsive thrust was powerful enough to suggest that 'sloppy' seconds could produce another $5000 winner like the one that played out over two days last week. That implies a ride from the green line (x) to the red (p), a climb that doesn't look too challenging when visually imagined. Regardless, and unless there's a swoon exceeding C=88.23, the 108.25 target will remain theoretically viable. _______ UPDATE (Aug 1, 10:48 p.m.): Yes, the plunge to the green line has triggered a mechanical buy, the second such signal from this pattern. My gut feeling is that the futures will achieve p=98.24, good for a one-level ride, but I am not recommending the trade unless you know how to 'camo' the entry risk down to perhaps 5% or less of the implied $20k (on four contracts) if C=88.23 were to be stopped out. ______ UPDATE (Aug 4, 10:54 p.m.): My gut feeling was wrong, for oil is weaker than I'd imagined. Even so, the September contract should get a bounce from here, since bulls got stopped out with today's dip below C=88.23 of the reverse pattern.
Last week's price action served to remind us that big rallies and even entire bull markets are driven mainly by short covering. This doesn't happen by accident; Wall Street's quasi-criminal masterminds set short squeezes in motion using news as a catalyst. The booby traps they employ are more or less predictable, but they succeed anyway because DaBoyz can count on short-covering bears to panic every time under certain conditions. On Friday morning, for instance, in the wake of a 75-basis-point rate hike by the Fed, trade-desk capos jockeyed index futures into position so that a tough resistance that had thwarted them a day earlier and overnight could be dynamited into oblivion. The chart shows more than 14 hour of head-butting at a 4109.25 'hidden resistance' I'd disseminated to subscribers a day earlier. The target had worked precisely, allowing them to jump on the trend. Some reported exploiting it in two ways: 1) getting long for the ride to it; and 2) getting short when it was hit. This could have produced a profit of as much as $1,400 per contract. However, profiting from a short at the top would have required waiting until an hour prior to the opening bell, since that's when the Street's lieutenants began to work their carnival midway illusions. How to Exhaust Sellers It was a piece of cake, since they've been practicing ever since the Grandaddy of All Bull Markets took flight in 2009. They simply pulled their bids, just as they've done hundreds of times over the last decade, allowing index futures to plummet ahead of the opening bell. This trick completely dried up selling, leaving stocks no way to go but up when the opening bell rang. At that point the carny men simply stepped aside and let short-covering panic accomplish what mere
TLT topped last week precisely at the D target of a pattern I'd shown on the 120-minute chart. The pullback was shallow, however, so I lowered the pattern's point 'A' to produce a higher 'D' target at 121.68. This view affords me two predictions that I can make with very high confidence: 1) 121.68 will be reached, and 2) a tradeable pullback will occur from that price, give or take just a few pennies. Both predictions are based on price action at the midpoint Hidden Pivot resistance, 116.87. This rally will further affirm that the long bear market in Treasury paper is over and that interest rates on U.S. debt have peaked._______ UPDATE (Aug 5, 10:20 a.m. ET): TLT has pulled back sharply after an off-hours leap earlier in the week to 121.50, a tenth of a percentage point shy of the target I'd provided above. Perhaps price trends these days -- in bonds, stocks, bullion and much else -- get stopped cold at Hidden Pivot targets because the Fed has succeeded in confusing everyone, or at least getting everyone to obsess over Fed policy? This is quite a trick, considering that the very notion of using larger and larger quantities of debt stimulus to create 'wealth' and sustain the economy is a fraud. This is so because the economy to begin with and in notional dollars is based far more on paper shuffling than producing real goods and services. The deception arguably ranks as the greatest hoax every perpetrated on humanity,
Although there's a solid consensus in the chat room that a major bottom is in and that my 1665.00 target will not be reached, I have my doubts. They are based entirely on the decisive downside penetration of p=1773.80 on July 5. I have only very seldom seen 'p' obliterated in this way without giving way to a follow-through that hit 'D'. If gold's robust two-day rally is going to be an exception, the first evidence of this would come with an impulsive thrust exceeding three 'external peaks that lie, respectively, at 1744, 1751 and 1771. That's the kind of power rallies typically exhibit when ending bear markets. If this one can vault all three peaks with no visually significant pullbacks along the way, I'd infer it is the real deal -- at long last. (July 27 note: For the December contract, the three peaks lie at, respectively, 1763.70, 1770.80 and 1785.80.)
Silver showed none of gold's feistiness last week, but that doesn't mean it won't follow gold higher if bullion quotes are about to embark on a sustained rally. Silver's relative strength would presumably increase as a bull market pushes toward adolescence, shrinking the gold silver ratio from a current 93 to a more silver-friendly level below 50. For now, though, we can infer that September Silver's reluctance to punch below p2=18.06 reflects consolidation, not distribution. The 16.53 downside target will remain valid in theory nonetheless, until such time as the C=22.65 high of the bear-market pattern is exceeded. However, it's not yet possible for me to say with high confidence whether it eventually will be achieved.
The futures reached the end of the line Friday at the 4012.25 Hidden Pivot target of a bear rally pattern begun five weeks ago from 3960. Is that it? We'll let impending price action answer that question, since there is always the possibility that buyers will blow past D in a trice when the new week begins. That would put them on a course to test the resistance of a series of downtrending peaks recorded in early June. There are still outstanding targets at 4033 and 4116, plus a 'soft', best-case target at 4256. I haven't made this tactic official, but you can use the HP levels of the spent pattern shown in the chart experimentally for 'mechanical' trades. ______ UPDATE (Jul 26, 6:43 p.m.): Index futures have lunaticked sharply higher in after-hours trading, presumably because both Microsoft and Google released dreadful earnings news. This is how DaBoyz punish bears for guessing right: by pulling their offers in a zero-volume environment so that stocks can zoom gratuitously. This will also give the news media a chance to come up with a dozen wrong reasons why stocks have rallied on bad news. How far will they get? Not very, would be my guess. ______ UPDATE (Jul 27, 7:26 p.m.): Finally, the short squeeze we all knew had to happen before the Mother of All Bear Markets can resume in earnest! On nearly universally anticipated "news" from the Fed, the futures blew past the 4033 target with enough force to be presumed headed to at least 4116.75, the next Hidden Pivot target in the sequence provided above. Here's a smaller pattern that can be traded 'mechanically' on the way up, with a 4095.25 'D' target that looks absolutely certain to be achieved. _______ UPDATE (Jul 28, 3:13 p.m.): I've raised the target to 4109.25,
The selling that ended the week brought the futures to within $1.00 of a 'mechanical' buy at the green line (93.24). The trade rates a '5.0' and would therefore require cautious handling via a 'camouflage' set-up on the lesser charts. The 5.0 rating means I think there's a 50% chance the futures will rally from the green line to at least p=98.24, where a partial profit could be taken, before falling below C=99.23. My hunch is that crude will be subdued this week, given its failure to exceed some small peaks recorded in the second week of July. A modest bullish offset is that the rally in the first half of the week slightly surpassed its 'D' target. _______ UPDATE (Jul 26, 6:55 p.m.): The mechanical trade triggered in the middle of the night, producing a quick theoretical gain of as much as $5,000 per contract upon exit at p=98.24. Two subscribers reported jumping on it, although not in sufficient detail to warrant a tracking position. The 108.25 rally target shown in the chart remains theoretically viable, but I'm not recommending a second mechanical entry because I doubt it would be another easy winner.
