Gold

A strong close last week might have left me feeling less, um, disgusted with gold. Alas, the December contract took a $30 dive on Friday, and although it recovered some of it by the bell, the bounce wasn't strong enough to generate much enthusiasm  for the week ahead. For now I'll suggest using the bearish pattern shown in the chart (inset). It has yet to offer up any 'mechanical' shorting opportunities enroute to the 1633.50 target, so anything we do will probably have to come from the lesser charts. It's bound to be a bumpy ride, since bears have not exactly been knocking 'em dead either in recent months.

Bulls made encouraging progress last week with a spike on Friday above two prior peaks -- an 'internal' and an 'external, the minimum required to generate an impulsive leg. This will shorten the odds of a move to the upper line of a channel I'd drawn last week. It comes in at around 1864 and has a downward slope of about 35 cents per day. When the week began, my bias was mildly bearish, but this latest price action has tipped me bullish, That's notwithstanding the fact that gold closed well off the high. That was to be expected, since the high occurred a hair below the 'D' target, on the daily chart, of A= 1745.40 (10/6).  Sliding 'A' down to 9/29's 1721.10 low yields a new rally target at 1841.10. If reached that would be quite bullish, since it implies a breakout above three imposing peaks near 1836 recorded over the summer. Keep an eye on price action at p2=1820.90, since a stall there, precisely, could be prelude to a sharp reversal per 'Matt's Curse'. In the meantime, a pullback to x=1780.50 would trip a 'mechanical' buy signal, stop 1760.20. With $8000 initial risk on four lots, this one is recommended only to those who know how to cut the risk by as much as 95% with a 'camouflage' set-up. _______ UPDATE (Oct 25, 5:10 p.m.): I've made a slight correction in the chart that brings our target down a smidgen to 1840.30, with corresponding changes in x, p and p2.  I've done so because the pattern is gnarly enough to work very precisely -- not only for 'mechanical' bids, but for shorting at a potential top. The trendline noted above has been included. Here's the new chart.

With December Gold trading near the middle of the channel shown (inset), it’s easy to visualize a move in either direction to the top or bottom of the range. My hunch is that the next big move will be lower, however, since last week’s gratuitous hump failed by a whopping $9 to surpass a distinctive ‘external’ peak at 1810.60 recorded on September 14. We were looking to get short if that price were reached; alas, the plunge from a mere 1801.90 caught us flat-footed. But the fact that bulls have borne most of the pain over the last three months, and that bears are not being given easy opportunities to get short, are yet more reasons to suspect a breakdown is nigh. In any event, we won’t pretend to know the outcome, but it might become easier to speculate on one if Mr. Market should inadvertently tip his hand this week with a meaningful tell, however subtle.

Gold's pointless histrionics have been surprisingly tradeable, albeit only by Pivoteers who know what they're doing. Notice how Friday's stupid spike early in the session reversed from the secondary Hidden Pivot at 1782.70. Any rABC pattern one might have used to set up a short would have worked, although the pullback was so precipitous that executing a stop entry would have been challenging.  Some subscribers may also recognize that 'Matt's Curse'  took effect when the reversal occurred precisely at p2. This usually means the retracement will take out the point 'C' low of the pattern. We shall see, but if it happens we shouldn't take it too seriously, since gold has been visiting pain equally on bulls and bears alike for the last several weeks. _______ UPDATE (Oct 13, 4:20 p.m.): And speaking of pointless histrionics, you had to love gold's $40 lunatic leap today after spasming $20 both ways in the early going. A short a millimeter off the intraday high produced a profit for the subscriber who reported the trade in the chat room, but the pullback made little progress as the hours went on, suggestion that bullion's 'DaBoyz' aim to take this gas-case higher. Here's a pattern so gnarly that I can all but guarantee that it will work in every possible way, including shorting at 1810.50 via a 'camouflage' set-up. That means you could buy a pullback to p=1780.20 'mechanically' with a stop-loss at 1770.10. That's $4000 of entry risk on four full-size contracts, so minis are recommended unless you are trading with winnings racked up earlier. ______ UPDATE (Oct 15, 7:29 a.m.): When the little p.o.s. plunged overnight to within 70 cents of my 1780.20 bottom-fishing number, I used this rABC pattern to drastically cut the entry risk to $480 on four contracts. The trade

Last week produced an exceptional one-day rally, then a sideways follow-through that looks like a bullish consolidation. The start of something big?  Probably not, but we should take the possibility seriously, since, if stocks have entered a bear market, that would be the kind of paradigm shift that could change a picture in bullion that has remained stagnant for a year. I've displayed a weekly chart to put the rally in perspective: it is not even a blip, at least not yet. Nor should we get too excited if a fresh burst hits the green line, triggering a theoretical buy signal of long-term degree. That's happened twice since last summer, only to fail with the creation of two new point 'C' lows. This time price action so far is arguably less bullish, since the reaction rally off mid-August's stop-'em-out low didn't even reach the green line, nor was it impulsive on the weekly chart. I can offer no trading suggestions at the moment, but if you are scouting the lesser charts for opportunities, please don't hesitate to ask about them in the chat room. _____ UPDATE (Oct 4, 5:10 p.m. ET): If bears can chew through p=1770 tonight they'll be in good shape for a follow-through to the 1792.40 target of this pattern.  Using 'camouflage' to avoid $1100 of entry risk per contract, buy a pullback to the green line 'mechanically' if the opportunity should arise, especially in the wee hours.  _______ UPDATE (Oct 5, 6:53 a.m.): The trade triggered at 12:39 a.m., 14 minutes after the futures pulled back to the green line (1758.90). The set-up, shown here on the one-minute chart, produced a gain on four contracts of as much as $480 in 40 minutes before gold peaked shortly thereafter and dove. Initial, theoretical risk would have been

The decisive breach of p=1755.30 last Thursday strongly implies a finishing stroke to at least D=1722.2o in the days ahead. As always, if that Hidden Pivot support is easily exceeded, the downside target of a bigger pattern would be in play. Meanwhile, the futures triggered a 'mechanical' short from the red line that in theory is still 'live,' since the downtrend has yet to touch p2 following the signal. However, if they were to rally to x=1771.90, that would activate a second signal to get short. The stop-loss would risk nearly $7000 on four lots, but I'd suggest cutting it down to size with a 'camouflage' trigger on the lesser charts. If you're uncertain about how to do this, ask in the chat room when the trade gets close. _______ UPDATE (Sep 29, 9:40 p.m.):  We used the 1722.20 target to get long near the low, which occurred at 1721.20. The bounce has produced a profit of as much as $2500 on four lots so far. Check my Trading Room posts beginning at 10:33 a.m. for details. _______ UPDATE (Sep 30, 6:49 p.m.): Usually a sharp rally in gold is barely worth a yawn, but I'm keeping an open mind this time. That's because the same distinctive tone change that may already have caused stocks to top big-time may correspondingly launch the resumption of a bull market in bullion that we've patiently awaited for more than a year.

Gold has looked so awful lately that I've gone against my gut in drawing the mildly bullish chart shown in the inset. It is a slightly 'reversed" ABC pattern, with a point 'C' just a hair beneath late March's 1683.00 low. The pattern projects to 1916.20, which would represent a 7% gain from Friday's settlement price.  A 'mechanical' buying opportunity on a pullback to x=1737.50 is strongly implied, and so that is what I will suggest, at least for now. The trade would take a stop-loss at 1677 , implying about $24,000 of initial risk on four contracts. Since that is way out of our league, we'll use a 'camouflage' set-up if and when the opportunity arrives. Our goal would be to cut the theoretical entry risk by about 85%, to around $3600. _______ UPDATE (Sep 16, 9:04): Gold is garbage once again, diving hellishly just to mau-mau bulls. Since sellers look like they're about to pulverize the green line, I'll suggest backing away from the rABC set-up suggested above. the trade would still enjoy good odds, but at a cost of possibly excruciating pain.  Ace Pivoteers can attempt the trade nonetheless with a camouflage set-up pegged to a low near 1700, the sweet spot of the downtrend's discomfort zone. _______ UPDATE (Sep 21, 11:47 p.m.): So far, a bullish prediction made by 'Som' in the chat room is holding up. He called for an upturn after Sep 17, and that is in fact what has occurred. I am skeptical about how far the rally can go, but not so skeptical that I would forego an opportunity to make hay with it, trading with an aggressively bullish bias until weakness becomes evident. In the meantime I'll gladly vet any entry strategies broached in the chat room, so don't hesitate to

Gold ground tediously higher last week, using a five-day consolidation at p=1816 to launch a relatively measly $18 rally on Friday.  We'll continue to use the 1850.60 target shown (a slight adjustment from earlier) as a minimum upside projection, but don't look for the uptrend to blow it away, given the week-long dirge at the midpoint pivot. If gold shocks by doing  just that, you can use the 1916.20 target of this bigger, rABC pattern to inform your trades. Since it is a reverse-bullish pattern, with 'C' below 'A', it should work nicely for 'mechanical' setups. ______ UPDATE (Sep 8, 8:01 a.m.):  Far from shocking us with a strong follow-through rally, gold plummeted, as it so often does, for no good reason. Let's avert our eyes for the time being, lest we start to believe this frustrating price-action actually means something.

I've grown so skeptical of gold's rallies that I didn't even mention the textbook 'mechanical' buy the December contract triggered last week on the pullback to the green line. It was worth $5,000 to anyone who bought there, and more power to you if you did without waiting for me to confirm. Since the pattern has worked so nicely for bulls, let's use D=1829.60 as a minimum upside objective. If that Hidden Pivot is decisively exceeded, the new target would be 1851.50, calculated by shifting B-C up a rung. Either target is worth shorting if you've made money on the way up, but I'd risk no more than $80 per contract with a 'camouflage' set-up or rABC.