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.
AAPL looks all but certain to reach the 158.55 rally target we've been using for the last few weeks. Will it overshoot the Hidden Pivot, presaging a possible test of March's watershed high at 178? I doubt it, but we should be prepared for an outbreak of irrational exuberance nonetheless, since it would be short-covering all the way, impelled and manipulated by chimps who have lived on autopilot almost solely from AAPL's long bull market. They were never going to just roll over, and what we are seeing is a distribution for which they have been conducting drills and test runs, starting with a stock split that brought the price down to a level that the rubes could afford.
If gold is bottoming, the evidence has been somewhat more persuasive on the Comex than in ETFs reflecting growth prospects for miners and junior exploration companies. This ETF generated a weak impulse leg last week that was doubtless sufficient to pique the interest of weary bulls. but the next thrust would need to impulse above the 33.27 peak recorded on July 1 to be worthy of notice. The move would be more persuasive if there is no discernible B-C pullback once GDXJ has surpassed Friday's dubious high at 32.29, which was achieved on the opening bar with a short-squeeze that would have trapped and soured more than a few bulls.
Shorts were under intense pressure to cover as the week ended after getting squeezed for two consecutive days without a chance to rest. For all the pain the 148-point rally may have caused bears, it barely registered a blip on the daily chart. No prior peaks were surpassed; moreover, it would require a further upthrust of 326 points to generate an impulse leg on the daily chart. Even so, I've given the bull the benefit of the doubt with the most ambitious target (see inset) that can be projected using a 'reverse pattern'. It lies at 4116.75, although a move to that number cannot be considered a lock-up because p=3877 has been pounded without giving way The pattern itself has been working nicely for trading purposes, having produced two $24,000 'mechanical' winners acquired at the green line. ______ UPDATE (Jul 18, 7:43 p.m. EDT): A dip to x=3758 would trip a third 'mechanical' buy, but the odds looked better when two similar trades were triggered earlier this month. Getting short is no piece of cake either, as anyone who has attempted it during the last three sessions will have surmised. _______ UPDATE (Jul 19, 5:30): Frenzied shorts continued to machine-gun themselves in the foot, so perhaps it's a good time to LOWER our sights lest we get caught up in the madness. Although the 4116.75 target noted above will remain valid, I'll suggest focusing on a lower Hidden Pivot resistance at 4033.75 derived from this pattern. We'll want to try shorting there in the usual, risk-averse ways. I'll also introduce 4256 as a 'discomfort zone' objective in case there are still a few bears stupid enough to hang on for dear life above 4116.75. Here, in summary, are the tradeable obstacles above: 4033.75, 4116.75 and 4256. As always, a decisive move
Crude's gains toward the end of the week were impressive, but buyers looked winded when the clock ran out on them. Regardless, we should view the 99.85 rally target shown in the chart as a minimum upside projection for the near term. The pattern has already produced a $5200 'mechanical' winner on four contracts bought at the red line and would signal an equally promising trade if the futures were to swoon to the green line (95.89). ______ UPDATE (Jul 19, 6:50 p.m.): I've opened a larger 'reverse pattern' with a 110.78 target, since the D targets of smaller ones have gotten vaporized these last few days. Monday's impalement of p=100.67 implies a strong likelihood the D will be reached. A swoon to X would trigger a very attractive 'mechanical' buy, stop 90.55. ______ UPDATE (Jul 21, 11:14 p.m.): Here's a chart for the September futures, with D=108.25. A pullback to x=93.24 would trigger an enticing 'mechanical' buy.
Finally, a bottom in sight? Judging from the chart, with its textbook rhythms and clarity, it will be hard for the August futures to avoid reaching D=1665.00 and then bouncing tradeably from this Hidden Pivot support. The downtrend has obliterated several minor supports where I'd suggested bottom-fishing, but also a major one at 1773.80, the midpoint of the C-D leg. This suggested there was urgent selling still to come, and we will likely see the last of it within $1-$2 of the target. The pattern is too obvious for traders to count on a precise turn from D, but even an imprecise one should serve for bottom-fishing with risk tightly controlled. _______ UPDATE (Jul 21, 11:15 p.m.): The futures took a trampoline bounce after swooning to 1678, but I am not ruling out the possibility of a relapse that gets closer to my 1665.00 target. Alternatively, a push exceeding 1744.30 would put bulls back in charge.
Although we should always be alert to the possibility of a turn from the secondary pivot (p2), in this case it seems unlikely. Once September Silver penetrated p=19.59 decisively, it never looked back. The futures seem to have eyes for the 16.53 target we've been using, and this is corroborated by a corresponding one in August Gold at 1665. A tradeable turn from near 16.53 if it is reached is all but a lock-up, but as I've mentioned in the latest gold update, the pattern looks too obvious to deliver a low we can count on to be precise.
