Webinar

Charts for Gold, Wheat and the Mini-S&Ps were filled with opportunity, making this an especially fruitful session. Bullion futures were sinking, and the evidence pointed to still lower prices. Even so, we found ways to speculate against the dominant trend with relatively little risk. Wheat also gave us a buying opportunity against a bearish backdrop. The camouflage entry spot we found was as pretty as they come, so this segment of the session bears a close look. The session concluded with a look at the E-Mini S&P, which was rallying from an exact Hidden Pivot midpoint. This is as we might have expected, since the Great Bear Rally of 2009-10 is never-ending.

We devoted the entire sessions to Comex gold and silver charts, poring over a promising rally that has unfolded in the opening days of the New Year. Futures contracts for both metals had triggered conventional Lindsay “buy” signals earlier in the day, but there was a question as to whether the signals were subtle enough to be used for purposes of camouflage entry. The answer was a qualified “yes” that touched on the psychological dimensions of the charts. Indeed, the ultimate goal of Hidden Pivot analysis is to move beyond the mechanical rudiments of the system and toward a nuanced understanding of the psychology of markets.

With gold in the throes of a major correction, we took a long, hard look not only at the Comex futures contract, but at the Dollar Index, where a short squeeze about to enter its second month has progressed, much to the detriment of bullion. Still-lower prices for gold seem likely, as do higher prices for the dollar. What would change this scenario? A good, strong impulse leg on the hourly chart. Until it happens, however, we should infer that the downtrend is likely to continue. This same idea was relevant in our analysis of T-Bond futures, which are in a protracted decline.

Subtleties occupied our time, including some of the finer points associated with camouflage. ABC perfection is what we should look for – always -- but today’s selection yielded only meager possibilities. This was all to the good from a teaching standpoint, since we need to be able to recognize weak patterns in order to pick out strong ones. Gold, the E-Mini S&Ps and T-Bond futures all came under scrutiny, and we were able to discover some tradable opportunities in each.

When looking for camouflage entry possibilities, we should bear in mind that the opportunity manifest in a small pattern will never exceed that of the larger pattern surrounding it. This was a concern when we considered charts for February Gold and the E-Mini S&Ps. Both said “higher,” but not before corrective patterns in each had run their course. We also looked at T-Bond futures and found reason to wait for further, significant weakness before we step in to buy.

The lessons of a dull day were everywhere to be found: dueling impulse legs, tick-chart trades and microtrend analysis that said little or nothing. Still, these conditions represent the occasional condition of the real world, and so it can be instructive to ponder charts that yield almost no useful information, even when viewed with a magnifying class. What we did find was that the GLD charts provides a useful proxy for gold futures that cuts through the confusion. We settled on an upper and lower threshold that should put all anxieties over bullion’s next move to rest.

We lingered on gold’s one-minute chart, and although there were some microscopic camouflage opportunities to consider, none measured up to our expectations. Even so, this gave us a chance to delve into the psychology of gold’s price action that morning, and to ponder the factors that might cause us to either accept or reject a potential trade. Bottom line, our expectations for small abcd patterns must be aligned with the bigger picture to bring us to a trade. On days when the action is mostly sideways, there is not necessarily a reason to trade, even if it is possible to book tiny profits again and again.

Gold was pounding on resistance pivots with well-nigh irresistible force, so we considered the bigger picture offered by a jerry-rigged Tradestation monthly chart. It showed continuous-contract action going back to 2001 and gave us the wherewithal to project a 150-point rally that is nowhere to be found on the daily chart. We also looked at the E-Mini S&Ps for a camouflage opportunity, but there were none. This served to remind us that opportunities in the micro time frame are worthwhile only if they are in alignment with patterns of a larger degree.

In the Rick’s Picks chat room, thirty minutes before this tutorial session began, we homed in on December Gold as a camouflaged buying opportunity began to unfold. Although the futures had been moving tortuously sideways in a tight range for the last seven hours, this looked like the best long-entry possibility of the day; and so we “took it” (and not just hypothetically, since several in the chat room actually initiated the trade in their accounts). The trade worked out beautifully and is described in exhaustive detail in this recording. We also took a close look at the E-Mini, which, even in the context of an unpromising rally, was developing an easily tradable pattern; and at the Gold Bugs Index (HUI), which looked great for a dozen reasons.