Market Outlook

Crude futures have been moving quite precisely to our pivots, as some of you have noticed. The last minor-cycle peak fell just a nickel shy of a well advertised 58.21 projection, and the subsequent low at 53.45 (basis the continuous contract) missed by just 12 cents. Now the futures are off and running again, bound in my estimation for at least 60.40 over the next few weeks. If this is cause for worry, you wouldn't know it from the blas� reaction yesterday of the stock market, which recouped moderate losses from earlier in the session to close slightly higher. Don't Worry, Be Happy Maybe Wall Street's equanimity derives from the Bobby McFerrin Theory of Economics, which states: 'Don't worry, be happy we are a service economy' (as Mr. Greenspan and his shills are only too happy, if not quite blithe, to remind us whenever necessary). Granted, the U.S. economy does skew rather heavily toward services, as he implies. There are all those banks. And Hollywood. But we still consume quite a bit of gas getting to the office and to the grocery store -- not to mention, to Chicago, New York, Washington, Seattle and L.A.. to 'service' our clients. Considering there is almost no new oil being discovered, though, at least by the majors, what do you make of this story, out Monday in the Wall Street Journal under the headline ChevronTexaco Strikes Black Gold: 'At a time when the price of oil is skyrocketing, ChevronTexaco just laid claim to a big puddle of the stuff. The No. 2 U.S. oil major will buy Unocal, the No. 9 oil company, for about $16.8 billion, or about $62 a share. ChevronTexaco beat competing bids by Italian oil company Eni and China National Offshore Oil Corp. The deal comes as oil prices have been

A subscriber took me to task in an e-mail yesterday for scaling back my coverage of precious metal shares in the last few months. In retrospect, with gold in the dispiriting throes of a bear cycle that began in November, my response is to ask, What more might I have said? I am as bullish as ever on gold's long-term prospects, but I cannot bring myself to be a cheerleader each day for precious metals when there is insufficient technical evidence to support the short- and intermediate-term bullish case. Nor can I track more than a relative handful of mining stocks in the labor-intensive way that I've tracked Bema, Kinross, Newmont, Canyon and a few others. In these stocks, to avoid the bull traps that have decimated the ranks of gold bugs since 2003, we've waited patiently to buy at hidden-pivot bottoms; taken partial profits on subsequent rallies; avoided buying on pullbacks that were to persist; and bailed out of specific stocks when they went against us, even while we planned to reacquire those stocks at still lower prices ' usually hidden-pivot targets. This has not only saved us from losses, it has allowed us to make money on long positions as mining stocks have fallen. That's a pretty good trick, as I'm sure you'll agree, but it's not possible to do it with the scores of gold stocks that I've tracked cumulatively over time. However, by using certain of those stocks as proxies ' usually, the stocks you suggest during our weekly Q&A sessions ' I hope to provide the kind of information that will be helpful to those of you trying to manage gold portfolios through good times and bad. Moreover, to do that job effectively, I have completely tuned out all of the other bullion-touting gurus, even

We added to our short position in the S&Ps on Friday's close, breaking a personal rule which holds that one should never stake out a new position minutes ahead of a weekend. But the temptation to augment our 'don't' bet proved irresistible, what with so many troubled-world bellwethers acting�troubled. Gold was staging for an assault on $450, bond yields were rising, bank stocks were getting pummeled, and crude oil prices were once again on the rise. It'll be quite a challenge for TV's talking heads to spin all of this bullishly over the weekend, so we shouldn't be too surprised if the glum mood that prevailed on Friday lingers into the new week. The weakness in bonds in particular is starting to weigh on investors, and even though 30-year Treasury futures have yet to reach the critical, bearish threshold I flagged here last week, they'll be in lousy shape to resist its pull come Monday. Not that that would catch every bond-watcher unawares. For one, fellow ex-New Jerseyan Burt R. appears to have caught the recent upturn in yields just right: 'Thanks for you excellent call on the long bond,' he writes. 'I used your hidden pivot to nail the low on mortgage interest rates. The 30 year fixed is up one half percent since I refinanced. I'll be watching your future recommendations to see if I can do it again at an even lower rate.' Re-Fi Boom,. R.I.P. I just re-fied myself, Burt, in order to get a recalcitrant ARM under control. But my guess is that you and I will not be refinancing again for a long, long time. In the first place, to cool speculation, the Fed is rumored to be intent on preventing yet another re-fi cycle from gestating. As we know, the central bankers have

Bullion had its best day in a while, spurred by a dollar that couldn't stand up to firming oil quotes. Comex April Gold settled at 441.00 after spiking to an intraday high just below our minimum target at 441.60, a hidden pivot. In night trading the futures were moving still higher and had touched 442.00 at press time. This should all but clinch a run-up at least to the next minor pivot, 445.80. The bullish action was corroborated by movement in the XAU, which created a new and robustly bullish impulse leg on its daily chart by surpassing a plainly visible peak made in mid-December. Breadth was impressive too, with mining stocks rallying across-the-board. We hold profitable positions in several of them, including Bema and Goldcorp, but yesterday's rally was so strong that even our laggard, Kinross, went solidly in-the-black. The stock was up 38 cents on the day, a strong percentage gain for a $7 stock. Newmont, a bellwether stock and key player in the bullion sector, rose $1.42 to close at 45.91. This wasn't quite sufficient to get it past a watershed peak at 46.40 recorded in mid-December, but it left NEM in good shape to challenge that high over the next few days. If the stock surpasses it, that would create a powerfully bullish impulse leg on the daily chart. It would also open up a low-risk opportunity for us to open a long position in the stock, since we missed doing so with a bid for June 50 calls when NEM took off nearly a month ago. Impulse Leg-o-Rama Overall, the signs are most encouraging ' not merely because the rally in precious metals issues has been strong and steady, but because it has pushed many mining-related stocks and indexes above prior peaks on their respective

We bailed out of two gold stocks yesterday ' Canyon Resources and Durban Roodeport Deep ' with no net losses. Not too shabby, considering the latter stock at one point was probing lows 50 percent beneath the previous day's close. It was quite a day for DROOY shares. In case you missed the news, the company's CEO said that improved efficiencies at Durban's South Africa mines had failed to offset the low Rand gold-price. As a result, DROOY plans to restructure part of its North West Operations, where labor currently represents 58 percent of total costs. I've said before that it's somewhat masochistic to hold South African golds in one's portfolio when there are so many promising mining companies operating right in our back yard. I guess that makes me a masochist, though, since I continue to hold a small DROOY position for my kids. Call it a hobby. But in my advice to you, I will always play it strictly by the numbers, initiating new positions only at promising pivots, taking partial profits when appropriate, and rigidly adhering to trailing stops. (Click on image to enlarge) It was by applying all three of those tricks diligently that we managed to exit DROOY and CAU without pain. We'd bought a stake in both earlier this month at what turned out to be exact minor-trend lows. When DROOY rebounded shortly thereafter, I advised the sale of half the position at 1.48, seven cents below the stock's recent high. That sale looked pretty good yesterday morning, when DROOY wind-sheared down to 78 cents on the news. Bought the Bottom A few subscribers wrote to say they'd bought stock near the low, which is great. I put out an after-the-fact hidden-pivot target at 0.80, and although it was by then valueless to traders,

'Hey, Rick!' writes long-time subscriber Joe M. 'Bob Moriarty, John Mackenzie and Jeff Kern have all given buy signals within the past few weeks, and that's good enough for me. Could you give some possible entry points in Hecla, Vista Gold, Coeur d'Alene, Bema, Eldorado Gold ' or anything that you're in tune with?' Surely, Joe. We'll consider these stocks and many others in real time come Tuesday morning, when Rick's Picks holds a special Q&A session. Special in what way? Well, usually I take questions only during scheduled session hours. This time, though, to give subscribers who live outside of North American a chance to participate, I'm going to open up the e-mail chute starting MONDAY evening at 8:30 p.m. EST. Quite a few Australian subscribers have asked for this, since, for them, it's 3 a.m. the next day when we're busy chatting away around lunchtime in New York. Concerning the bullish consensus on gold, the three guys you've mentioned pack almost as much force as the Earth's rotation. We turned bullish on gold ourselves within two ticks of the Dollar Index's high on February 8, and managed to buy some shares in DROOY and Canyon Resources at their exact lows (respectively, 1.21 and 0.82). Still, I'm not willing to stick my neck out too far, since both the XAU and the HUI have yet to hit bullish tripwires that will allow us to relax some. I plan to take the rally in bullion and precious-metal shares one day at a time, especially since the mining stocks appear to be lagging physical gold and silver so far. Anyway, if the likes of Bema, Coeur d'Alene and Vista really are on their way to the moon this time, we won't be giving up much if we happen to miss the

Our hidden-pivot targeting has been extremely accurate lately, producing tradable swing points in gold and energy that worked out to the penny. In fact, recalling the targets we used this week to bottom-fish in March crude oil, Durban Roodeport Deep and Canyon Resource shares, the total error for all three issues was just a single penny. In Durban (DROOY), back in October, I'd projected an important low at $1.21 when the stock was still trading above $2.00 a share. DROOY fell steadily over the next four months, hitting a low of exactly $1.21 on Monday before leaping sharply higher. The stock closed at 1.47 yesterday, up 22% from the predicted 1.21 bottom in just three days. To those who acquired stock at the low, I advised taking profits on half the position yesterday, an action that would have effectively lowered the cost basis on the shares remaining to 95 cents. We were similarly fortunate in Canyon Resources, for which I projected an important low at 82 cents three months ago with the stock trading around 1.38. We established a tracking position on paper at 82 cents on Tuesday, and although CAU pounded on that number the next day, it never traded below it. Yesterday Canyon ran up to as high as 98 cents, nearly 20% above the forecast low. And in March crude, there was this advice tendered in Rick's Picks a week ago, when crude was trading above $46: 'If the futures close lower today, they'll be signaling an impending move down to 44.61. That's a promising hidden-pivot support related to a minor cycle, so let's plan on bottom-fishing there with a stop-loss at 44.53.' In fact, March crude bottomed at exactly $44.60 on Wednesday (see chart below) before leaping to $46.70 yesterday. Not long before, with the futures

So far, so good. We saw the Dollar Index reverse on Tuesday from within 0.02 points of a hidden-pivot target at 85.37. It subsequently traded down to 84.89 yesterday, but it's still too early for me to assert confidently that this so-far very modest, half-point decline is the beginning of a significant downtrend. It might be, is about all I can say at the moment. The most compelling argument to the contrary is that Comex gold has yet to reach an important -- and unmistakably clear -- targeted low. The April contract settled at 414.50 yesterday, nearly three percent above the projected 403.20 bottom. The good news is that speculative long positions we recently established in some gold stocks, notably DROOY and Canyon Resources, have reversed very precisely from hidden-pivot lows and so far held above them. A more important mining-sector bellwether, Newmont, has yet to confirm by reaching its downside target, 39.73, but the fact that it has reversed from a fractionally higher bottom could indicate that a presumably impending rally in bullion shares will be especially strong. Bottom line, we are cautiously optimistic that precious metals may have reversed their steep slide from early December's peaks. Regardless, to the extent we've put our money on the line to leverage this assumption, we've used very tight stops amounting to just a few pennies per share. I'll leave you with this chart of the continuous euro, which suggests that its weakness relative to dollar was due to end, at least temporarily, with Monday's low. The low at 1.2737 fell fractionally shy of my projection, a hidden pivot at 1.2649, but it came close enough that we can give the bull the benefit of the doubt for now. (Click on image to enlarge)

To the many of you who are closely attuned to gold's vital signs, let me broach the possibility that the dollar reached a short-term top yesterday. Rick's Picks has been bullish on the buck for the last two months and recently projected a rally top in the Dollar Index at exactly 85.37. Yesterday, this hidden-pivot was exceeded by just 0.02 points, an overshoot small enough to fall within my margin of error. We should therefore anticipate weakness in the dollar over the next several days, at least, and corresponding strength in gold and the euro. Both have looked pretty sickly lately, but if they're ready to rally, this would be a good time to get rolling. Coincidentally, in the last two days, we established speculative long positions in two junior mining stocks that subscribers had inquired about during one of Ricks Picks' twice-weekly Q&A sessions. One of those stocks, Durban Roodeport Deep, had been making its way down to a hidden-pivot target at 1.21 that we first advertised here on October 19. For your guidance, we will be tracking 200 shares purchased at that price, using the usual micro-tight stop-loss. We are using a stop because, as we noted earlier, DROOY could fall to as low as 0.80 if it closes beneath 1.16 for two consecutive days. Along with DROOY, we added 400 tracking shares of Canyon Resources yesterday after we were reminded by an alert subscriber that we had long ago projected a potential bottom on CAU at 0.82. About an hour into the session Canyon bounced from that price exactly, finishing the day at 0.87. We'll use a stop-loss at 0.79 for now, since, as we pointed out intraday, this is not a trade on which one should bet the ranch. What Does Newmont Say? With shares of