Gold

Gold's ascent since bottoming on New Year's Eve has been more labored than we might have wished, but it has continued to move higher nevertheless.  The most meaningful rally target I can cull from the hourly chart is 1275.70, a Hidden Pivot that required a some bending of the rules to create. Even so, I'll suggest using it as a minimum upside target for the near-term. It is weakly validated by yesterday's bounce from 1.10 below the midpoint pivot -- too far below the pivot, actually, to lend precision to our outlook. However, the bounce itself looks promising -- sufficiently robust to reach the 1275.70 target.  Because a stall could be fatal, the target must be achieved within the next day or two to keep alive the premise that this rally is different from those that have preceded it in the last two years.

It's late Sunday night, and the futures have finally surpassed December 16's 'external' peak at 1251.70, generating a bullish impulse leg on the daily chart. It has been a month since this last occurred, although that encouragement failed to produce much of a follow-through. Traders should bring a bullish bias to the task nonetheless, leveraging with 'camouflage' such entry opportunities to get long as may become manifest on the lesser charts.  The tactic would become less speculative if a pullback creates a distinctive point 'C' low on the daily chart today or tomorrow.  Any subsequent entry signal would represent the best low-risk entry boarding opportunity we've seen in a while.

With the bear market extending well into its third year, I will continue to place the burden of proof heavily on bulls, as I did in yesterday's tout. This means they must push this vehicle above the 1251.70 'external' peak before we infer that they're in command, and the sooner the better. In the meantime, the futures can be bought speculatively at the 1216.60 correction target shown, with a stop-loss as tight as three ticks. The 1224.40 midpoint support is a riskier spot to try bottom-fishing, since it coincides with yesterday's low -- an implied structural support that will surely attract a following.  Under the circumstances, camouflage will be the way to go, although it may require zooming all the way down to the 1-minute chart or less to find an uptrending abc pattern suitable for the job.

We're told there was nothing criminal behind yesterday's $30 swoon. Even if that's the case, there was most surely a whiff of desperation on the seller's part. COMEX reported that 4000 contracts changed hands in the space of a single second. That might not sound like a lot of time, but it evidently was time enough for buyers to pull any and all reasonable bids, the better to rip the unfortunate seller a new orifice. From a technical standpoint, we'll still need a pop above December 16's important 'external' peak at 1251.70 for bulls to remain on the offensive. If it happens today, but no later than Wednesday in any case, that would be best.  My immediate upside target is 1261.80, so traders should bring a bullish bias to the task.

Feb Gold has fallen back to unchanged after bolting from the gate Sunday night, but not before generating a fresh, bullish impulse leg (see inset) on the hourly chart. The move has set up a possible buy signal on any follow-through leg that occurs from a low of 1232.30 or higher. I've sketched this hypothetically for night owls who trade this vehicle, but I'd suggest using 'camouflage to get aboard if you try it, and to limit theoretical entry risk to 5 ticks or less by using a chart of lower degree (i.e., the 3-minute or less).  However, if you'd prefer to enter via a conventional buy-stop on the hourly chart, you should wait for a second point 'C' to form in order to give the overly eager their chance to get stopped out with a loss on the first try. There is risk of missing the trade, but it is justified because gold traders were being pretty coy Sunday night. _______ UPDATE (10:01 a.m. EST): It was actually the third point 'C' that worked, yielding an entry point at 1237.50 that is nicely profitable at the moment. If you got aboard, please let me know in the chat room so that I can establish a tracking position. Since the rally from the entry point has been $10 so far, and because the high came within $1.25 of the 1248.25 target, you should be out of at least half of any initial position by now.  The futures will need to improve on the so-far high by at least 0.70 to generate a fresh bullish impulse leg on the hourly chart. (There's an 'external' peak at 1247.60 from December 17.)

From a technical standpoint, I've been skeptical of gold's last umpteen rallies. For months, I've been using a bear-market target at $1028 that lies $200 below current levels. At a gut level, however, it's hard to be such a stubborn bear after reading the following at Fox News:  "Gold jumped on Thursday on some buying after prices plunged to a six-month low, but investors remained unenthusiastic because of a brighter global economic outlook and speculation of an imminent end to U.S. monetary stimulus."  This is exactly the kind of stuff we should expect to read when gold is making an important turn. And although I remain skeptical about this, you can be sure that I will not be glibly dismissive of rallies such as the one currently unfolding in gold and silver futures. Instead, I will lower the bar set here yesterday -- and even allow for some mild jubilation if the rally continues to surpass prior peaks, not on the daily and weekly charts, but merely on the hourly.  This the Comex February contract will do if it hits 1244.10 by week's end. The futures are currently trading at 1229.80, so a mere thrust of $14.30 would suffice. One other encouraging sign I'll be looking for is rallies that reach or exceed the 'D' targets of minor abcd patterns. The next such benchmark lies at 1240.40, a Hidden Pivot that is within shooting distance for Thursday night. The pattern I've used to project that target is shown on the accompanying chart. For now, we'll keep an open mind.

Gold futures are up sharply Wednesday night, trading 1223.30 at the moment on a $21 rally. However, to put the move in a meaningful perspective, it would take a further $139 of upside to turn the weekly chart impulsively bullishly. The daily chart is another matter, of course, and would require a print at merely 1251.80 to get things rolling for bulls. That said, the rally must be uncorrected between here and that price to hint of the kind of buying power that could conceivably end a bear market now well into its third year. Even more decisive in that respect would be an unpaused rally that hits 1294.80. Those are my bullish benchmarks, and you should set alerts at each to know exactly how encouraged you should feel each step of the way.

Big picture targets noted here earlier lie respectively at 1150.80 and 1028.50.  Bulls will still have a chance to dig in their heels at the 1186.50 midpoint pivot (red line) of the pattern shown. (Note: It can be bottom-fished with a tight stop-loss.)  If they fail to turn things around there, however, you could expect the slide to continue to at least 1153.20, the 'D' target of the pattern shown. That is close enough to the major midpoint pivot at 1550.80 to suggest the two together will exert a magnetic pull once 1170 (or so) is breached. Because they are separated by a few points, you'll need to use the camouflage technique if you attempt to bottom-fish.

You can bottom-fish the 1206.40 target with a stop-loss as tight as three ticks if the futures get there, but if you were to try this at the 1208.60 midpoint, 'camouflage'  is advised. Of course, if the futures go no lower than 1208.60, any impulsive rally that produces a shallow pullback from just above 1210.80 (an 'external' peak clearly visible on the 5-minute chart) would offer an excellent opportunity to board a bull move with relatively little risk. ______ UPDATE (3:50 p.m. EST): Sellers crushed the minor supports noted above, implying that bear-market targets of a much larger order are still in play.  My minimum downside objective is therefore 1150.800 (which can be bottom-fished cautiously) and thence 1028.50. Both targets were given here previously.