Gold

With last week's low, the June 28 bottom has been breached. The selling also generated a bearish impulse leg (see inset) on the weekly chart with a new bear-market low that will have caused many bulls to throw in the towel.  That is the reason for this morning's modest rally: stops got run beneath the June low, lightening the futures of erstwhile profit-takers on this bounce.  It will need to be quite strong -- at least $50-$60, as noted here earlier -- to suggest that a major low is in and that this is not merely a dead-cat bounce. In purely technical terms, it would take a rally of about $150 to turn the  weekly chart bullish (for the first time since August). Specifically, a print at 1362.40 is needed, and the rally would have to be uncorrected on the weekly chart once it exceeds 1267.50.

Last week's low was 1186.00, but if and when the futures resume the downtrend in earnest, slipping through the 1182.90 target (green line), the next stop on the way down to a major target at 1028.50 is 1150.80.  The last number can be bottom-fished, just as a rally to the 1209.20 midpoint pivot can be shorted (via camouflage).

The bear market target at 1028.50 proffered her yesterday is a good bet to be reached, in my estimation. There will be stops along the way, of course, including the one at 1182.60 shown in the chart, and some fleeting bounces. Yesterday's low got within $3 of the green line, and it's possible sellers will close the small gap that remains on Friday.  More important, however, is that the June 28 low at 1187.90 has been breached. This is not necessarily disastrous or even short-term bearish.  In fact, the opposite should obtain, at least for a short while, since many bulls who were hanging on will have stopped themselves out on the dip to a new bear-market low. The effect would be to lighten the load for whatever rally is about to occur. Considering the importance of the low that was exceeded, and the number of die-hard bulls this must have spooked, I'd expect a rebound of perhaps $40-$60. Any less would imply that gold is even weaker than we might have imagined, and that the next leg down will be steeper than we've experienced in a long while.

With yet one more lower low in a seemingly endless, two-year succession of them, the futures have nearly run out of room to correct last week's $57 rally.  Any lower and they will not only be beneath its starting point, they'll be threatening to breach an even more important low at 1187.90 recorded back in June.  At that point I would judge the bear-market pattern shown, with a 1028.50 target, to be in play. That, of course, would be even nastier than the 1125.00 target we've been using till now.  At this point, however, you could say that the futures are hanging on for dear life near the Hidden Pivot midpoint support of the target pattern.

The number to beat is 1248.20 (newly revised from 1252.00), a midpoint resistance whose decisive breach would signal more upside over the near term to at least 1276.90. Despite the disappointing price action of the last three days, bulls still hold an edge -- one that will remain intact unless December 6's 1210.10 is penetrated to the downside. Otherwise, an intraday high of 1252.30 or better, or a two-day close above the 1248.20 red line, would provide the encouragement we've been looking for.

We've been demanding that bulls prove their case each step of the way, so yesterday's stall three ticks beneath the red-line resistance -- a midpoint Hidden Pivot at 1252.00 -- wasn't quite the impressive demonstration we were looking for. The good guys will have another chance to prove their mettle today, but let's stipulate that the futures must close above 1252.00, or trade more than $2.50 above it intraday, before we infer that a run-up to at least 1280.70 is likely.

Friday's rally  tripped a buy signal at 1233.80, but the implied $1400 of entry risk per contract is more than the usual $40-$60 we typically abide. Camouflageurs should trade with a bullish bias, drilling down to the three-minute chart or less  to find a suitably relaxed entry opportunity. The short-term bullish case would become more compelling if buyers are able to push this vehicle above the 1249.50 red line today or tomorrow. That's a midpoint Hidden Pivot resistance, and its breach, especially if decisive, would portend more upside over the near term to the 1280.70 target or higher.

We'll grudgingly give bulls the benefit of the doubt for now, since the pullback from Tuesday's high looks like a classical consolidation. However, there is no getting around the fact that bulls lacked the cojones to push past the external peak at 1268.00 (see inset) on the first try.  This display of timidity is almost certain to have implications going forward, but at the very least it suggests that gold's true believers lack the energy or the conviction to end a bear market that is now in its third year. The futures remain a bull trade at the moment nonetheless, and traders should look to do their buying on a pullback from just above 1253.50.  That's equal to a small peak made near the end of Wednesday's session that's easily visible on the 5-minute chart. The relevant point 'A' low would be 1252.00 (6:25 p.m. EST). ________  UPDATE (December 12, 9:44 a.m. EST):  Gold has gotten dumped for the umpteenth time, so far retracing a little more than 70% of the recent, apparently gratuitous rally. If you need a slender reed of hope to cling to, the  1212.10 low is still intact. A longstanding bear-market target at 1139.50 remains viable.  This corresponds to the 1125 target given for the December contract. _______ UPDATE (December 13, 12:04 a.m.): As long as the 1210.10 low holds bulls are entitled to the benefit of the doubt. But they'll need a 'booster rally' of at least $14.40 to get out of crisis mode, and exactly twice that to set up a recovery next week. Assuming such a rally were to occur from no lower than yesterday's 1222.60 bottom, that would imply that 1237.00 is where encouragement begins, and 1251.50, a sigh of relief.

Yesterday's strong rally failed by a whisker to hit my bullish benchmark at 1268.10.  That would have generated a very encouraging 'impulse leg' on the hourly chart; alas, the actual high occurred at 1267.50, a mere 60 cents shy of a ballistic triumph. Now, although I expect the futures to get past 1268.00, the implication of their needing another running start at it is less bullish than if the resistance had been conquered on the first try. Even so, we should guard against being overly skeptical merely because every rally we've seen in recent months has fizzled. This one is to be traded with a bullish bias for now, and camouflageurs should use the 15-minute chart for ideas. As of this moment, a minor impulsive breakout would be signaled by a print at 1266.10 (see small inset), and a short pullback from just above that number would make for an enticing trade.