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-- Posted Thursday, 6 February 2003 | Digg This Article
We were looking for a correction to around $359 in the April gold contract but did not see it playing out within the space of just a few days, as it appear to be doing. The forward-month futures contract is two-thirds of the way there now, down from a fleeting high of $390.80 achieved on Wednesday. That’s what bull markets are all about: wicked swoons that fool fence-straddlers into thinking they’ll get even better prices if they sit back and wait for just another day or two. Typically, though, such bargain days are few and far between. More often, the corrections terminate abruptly with an after-hours leap that, in the case of gold, would push it back above $390 before would-be buyers can react. At this point they are understandably less than eager to pay $390+ when they could have had an ounce of gold for just $370 a day earlier. Bullion prices, ever oblivious to their pain, will continue to rampage, unencumbered by the many who missed buying down near $370. That will be the best buying opportunity they’ll see for many months, but the lesson will be all but forgotten when gold swoons once again from just below $500. While we’re on the topic of gold, here’s a note from a technically astute subscriber concerning Royal Gold (RGLD) and the XAU. You may recall that another subscriber had written to say that Royal is a fetching short near recent highs. “Rick, I thought you might be interested in a point-and-figure view of RGLD. I love PnF because it gets rid of all the clutter and noise, focusing only on the main trend (the lines under the X's and O's) and the immediate trend. By any chart, as you know, RGLD is setting higher highs and higher lows, and that's an uptrend. The sector is an uptrend and it's also in an uptrend when compared to the Dow, the SPX or the NASDAQ. Dorsey considers the sector still to be "favored." True, nothing goes straight up forever, so RGLD weekly momentum turned negative a week ago and [Wednesday’s] decline is sufficient to change its column from the rising X's to the declining O's. But for the moment, that's actually healthy. [Wednesday’s] RGLD decline reminds me of the young dancer in the Colorado Ballet who leapt so high in this seasons Nutcracker – he always dipped significantly just before exploding into gravity-defying takeoffs. XAU Breakout?
”By the way, I think one of the most powerful signals in Point and Figure charting is a bullish breakout from a triangle formation. The XAU gave such a signal December/January and has is also taking a dip before the explosive leap. I calculate the XAU should reach 118 before it gives a true trend reversal signal -- but remember, PnF calculates trends and can measure moves but makes no pretense to predict time.” FYI, we heard yesterday from another subscriber, a Floridian who sees gold correcting to 362.40 before launching to a minimum $415. He expects all of this to happen within the next 10-12 days. If so, all you bulls should fasten your seatbelts and enjoy the ride.
[The + symbol means we have an open position, while $ means there is actionable advice.]
Gold Futures
APR GOLD (370.70): We’re looking for a pullback to as low as 358.90 before the futures can get back in bullish gear. That’s a run-of-the-mill fibo level and not a pivot, so I won’t recommend trying to bottom-fish there.
GoldCorp (NYSE:GG) : Quote - Options - News - Profile - Message Board - Website
+ GG (12.34): Steady as she goes. We hold 200 shares for an average 4.65, and no changes are contemplated. When the stock closes above 13.77, or trades more than six cents above that price intraday, we should assume it's bound for a longstanding target at 15.72.  
DURBAN DEEP (NasdaqSC:DROOY) : Quote - News - Profile - Message Board - Website
$ + DROOY (4.06): We hold 400 shares for an average 4.66. Once again, day order, bid 3.88 for 200 more shares.  
RGLD (26.25): We missed buying March 30 calls at their intraday lows by a nickel, but we won’t chase them. Do nothing further for now. (Bored with the short-term picture, we took a look at some long-term charts today. You may find some of our conclusions interesting.) DJIA (7929): The Dow has been noodling around near an important hidden-pivot support at 8104, but once it loses its grip by closing at least 30 points below it -- probably within the next week or so -- expect the decline to continue to a minimum 7163.85. E-Mini S&Ps (843.50): Using the same pivot logic that I’ve applied to the Dow, I expect the futures to fall to at least 793.75 before they can stage a bear rally worthy of the name. MAR 10-YEAR NOTE (114.110): Again, no change. The futures would need to close above 114.310 to suggest that a test of the important January 31 peak at 115.175 is likely. OEX (423.49): We are bearish for the near-term, with a minimum downside projection of 403.75. We’ll consider buying some close-in calls if the opportunity should arise. It would require a close today above 443.55 to trip a moderately bullish technical signal. QQQ (24.21): Our immediate downside target is 23.39, a hidden pivot. Just so we don’t lose sight of the big picture, here’s a (very) high-confidence target for the longer-term: 16.42.
MAR NASDAQ 100 (969.50): The fall from mid-January’s high just above 1100 still has a ways to go – to a minimum 924.50 if our pivot analysis is accurate. Stochastic influences are mildly supportive, so don’t expect an overnight collapse; more likely is a torturous decline.
-- Posted Thursday, 6 February 2003 | Digg This Article
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MarketWise Black Box is published on weekdays 240 times per year. Copyright 2003 by MarketWise. For further information please go to www.marketwise.com. All information was gathered from sources believed to be reliable The risk of loss in futures, stocks or options can be substantial; therefore only genuine risk s should be used for such trading. Futures, stocks and options may not be a suitable investment for all individuals, and individuals should therefore carefully consider their financial condition in deciding whether to trade. Commodity option traders should be aware that the assignment of a short position will result in a futures position. Past profits are not indicative of future profits.
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