GCG10

When I projected a low in February Gold at 1107.70 yesterday morning in the chat room, I was pretty confident the Hidden Pivot support would be reached, since its midpoint sibling at 1122.50 had been exceeded by a very decisive $4, and because the pattern itself was close to perfect.  Instead, and much to my surprise, the futures turned on a dime at 1118.50, seemingly in the middle of nowhere, gaining $27 by the bell.   After-hours trading pushed the rally the few ticks higher needed to trigger the breakout above 1138.60 that I'd been looking for.  If you were looking for camouflage to get aboard at that point, although it came with great subtlety, as long as you applied the simple rules, it wasn't hard to find or to use (see inset). Looking ahead to Thursday, we should take encouragement if yesterday's precipitous reversal racks up a couple more "external" peaks to solidify the uptrend. That would imply a print at 1158.40 at a minimum, and it would put a midpoint resistance at 1175.00 in play thereafter as our minimum upside objective. That number is part of a pattern begun from 1028.00 just before Halloween, and if it completes to the target, that would imply 1274.70.

Yesterday's fright-wig plunge didn't even qualify as impulsive on the hourly chart. The reason is somewhat technical, and I've attempted to explain why in the accompanying chart. However, the fact that sellers failed to do their worst is no reason to celebrate, since they could easily return today in greater numbers to finish the job.  There are two Hidden Pivot supports below that we can monitor to get a sense of how determined the sellers are: the first lies at 1117.60; the second, its 'D' sibling, at 1102.80. The lower support looks like a more conservative play for bottom-fishing, since the higher number coincides with a bunch of lows recorded a week ago.  Alternatively, the most bullish thing I could see happening over the near term would be an upthrust touching 1138.80.  That would create a bullish impulse leg on the very lesser charts, and with it the possibility of some base-building into week's end.

So that it can be found archived in the touts section, let me repeat the outlook for February Gold discussed in today's commentary:  To keep shorts on the defensive, the futures will need to push on, taking out the fifth peak at 1170.20 shown in the chart.  A vigorous effort should take no more than one or two days to succeed, and we should expect no less if bulls are to tackle the all-time high at 1227.50 with overwhelming power.  To put it another way, the ease with which the futures get past 1170.20 is likely to be predictive of how easily they surmount resistance at 1227.50.

The futures are showing savage power Sunday night, riding the strongest night-session surge that we can recall in a long while. At their peak, gains totaled around $25 for the session, although the futures have pulled back by $10 since and are consolidating in the early evening (EST).  My minimum upside target for the near term is 1166.70, a Hidden Pivot that lies just above the so-far high at 1163.00. If the futures push above 1166.70,  expect resistance at 1169.60, representing a 0.618 retracement of the correction begun from 1227.50 a little more than five weeks ago.  It would take just a hair more to extend the impulse leg so that it  has taken out a fourth "external" peak at 1170.20, but even without this, shorts are already dead meat as we begin the new week.

Someone in the chat room spied an 1123.60 support early Thursday evening, and although it seemed to be holding, I would limit its use to analysis but not bottom-fishing. The point 'B' of the pattern is as sausage-y as they come, having failed to penetrate the juicy 1127.60 low recorded the previous day.  That doesn't mean the target is worthless: it is still the lowest low that can be projected on the lesser charts. But because of the malformed 'B', we shouldn't expect a precise and reliable bounce from the target; rather, we should go no further than inferring from the probable breach of the target that still more weakness lies ahead.  (Bulletin 9:50 p.m. EST): Within the last 30 seconds, the futures have spiked down to 1121.60, presumably stopping out 1123.60 bidders. Action looks pretty sleazy overall -- DaBoyz setting up for fabulous job numbers on Friday? -- and so I would further caution against picking bottoms based on whatever patterns you might be imagining.)

The rally, now entering its third week, refreshed the bullish trend yesterday by surpassing an obscure, look-to-the-left peak that is visible on the hourly chart.  However, buyers evidently were not feeling feisty enough to take on several more daunting peaks mentioned in yesterday's analysis. My hunch, based on the shallow pullback Wednesday night, is that they will do so today. This is a great opportunity for bulls to pin shorts on the ropes, since once GC is above yesterday's high, it will need only a six-point thrust to spear three (!) external peaks.

Yesterday's funereal rally may have extended Gold's winning streak to four days, but it was quite a bit less than we might have wished for. Notice how it apexed without taking on the look-to-the-left peak recorded on December 17.  Such tired action demands that we set the bar high today, and so we shall:  at 1143.40, a crucial dime above the peak I've circled. Even so, a lesser thrust that pulls back after barely exceeding 1132.30 could yield an excellent camouflaged buying opportunity with relatively little risk.

Enjoy the rally, but count on me not to get terribly excited about it, at least not yet.  If this is the real deal, we should see an effortless extension of the bullish impulse over the next two or three days.  That means taking on any or all of the four unbreached peaks immediately above on the hourly chart. It will require a  nearly $50 thrust from here to get past the bunch, the topmost of which lies at 1168.90 and the most immediate of which is at 1142.90.  Let's use the higher number as a "bullish-as-all-hell" benchmark for this first week of 2010.  For those who remain anxious, let me note that the rally is already impulsive on the daily chart (see inset), and that the bullish implications thereof will hold as long as the futures don't relapse below 1086.60.

A message that I left in the chat room bears repeating, since it was meant to allay anxieties concerning this so far garden-variety correction. I am trying to forecast bullion prices with coldly mechanical detachment. A potential benefit to subscribers is that they will not have to awaken each day with their nervous systems hard-wired to Comex Gold's 15-minute chart. As I tried to make clear the other day, there is no way gold can change directions on the hourly chart, embarking on a major rally, without telling every chartist on the planet that it is doing just that.  In the meantime, I would encourage all who follow my touts not to sweat the details.  However, if I have failed to discourage some of you from overtrading a vehicle in which you have an emotional stake (i.e., a "jones"), then by all means, buy gold speculatively and repeatedly at Hidden Pivots as you please, since it won't cost you much if you're wrong -- and because one right guess can make up for a multitude of wrong ones. Concerning actual targets, a disinterested reading of the hourly chart suggest that the futures are likely to fall to at least 1046.80 before they can turn around. However, a rally first that exceeds 1114.50 would negate the target, and a print today or tomorrow exceeding 1122.50 would likely be enough to send shorts diving for cover. Camouflage  entry is suggest along the route of such a rally, but if the futures fall, the first place where they could be bottom-fished with a tight stop-loss would be at 1080.60, the C-D midpoint of the pattern shown in the chart.