-- Posted Wednesday, 28 May 2003 | Digg This Article
A friend and mentor has kindly provided me with some finely nuanced charts from which it is possible to draw interesting conclusions about gold’s and the dollar’s immediate prospects. Although I remain maniacally and unapologetically bullish on bullion and mining stocks as long-term investments, my outlook for the intermediate term has been relatively subdued, as you will already know. This is because a bear rally in the dollar has appeared imminent for at least two weeks.
In earlier forecasts I was somewhat vague about where the implied support for the greenback would materialize, speculating only that it would occur around 92-95, basis the dollar index (DXM). With the help of my mentor’s intricately detailed charts, however, I am now able to calculate a more precise inflection point whence a potentially powerful bounce in the dollar could be expected to begin. As it happens, the hidden-pivot target lies at 92.84 -- exactly three cents from Tuesday’s V-shaped bottom. This is a major downside target, representing the culmination of a trend begun last November. As such, we should expect a strong dollar rally of at least several weeks’ duration, and possibly longer. The accuracy of this hidden pivot is corroborated by action in the euro, which on Tuesday precisely reached an upside target of comparable importance.
If I am right, the dollar’s energetic rally off Tuesday’s lows is merely the beginning of a correction that before it has run its course will raise doubts in those who had written off the greenback as dead. They are not mistaken, I hasten to add, only premature. Meanwhile, to those of you who have stuck by gold through thick and thin, I can only counsel further patience. I still consider bullion to be the no-brainer investment of our lifetime. But if it takes another few weeks for the June Comex contract to make a serious run at $400+, it will have been well worth the wait, since the bull market will take wing above that threshold. But don’t expect the dollar price of gold to come crashing down, since quiet accumulation of the metal is occurring now on a global scale. More likely, we’ll see just a moderate retracement as the dollar rises from the mat to throw some last, desperate body blows at a euro that itself will eventually succumb to gold’s irresistible power.
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[The + symbol means we have an open position, while $ means there is actionable advice.]
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Gold
$ AUG GOLD (365.00): If the futures have not traded above 366.50 overnight, you can bottom-fish a hidden-pivot support at 361.20, stop 360.90. Use a single contract and switch to a 1.80-point trailing stop above 364.00. Minimum target: 368.20.
GoldCorp (NYSE:GG)Quote - Options - News - Profile - Message Board - Website
+ GG (11.07): We hold 400 shares for an average 7.20. We were using a minimum upside target of 12.50, but the wind has shifted, leaving us now to expect the minor bear cycle to continue to at least 10.84. Do nothing further.
DURBAN DEEP (NasdaqSC:DROOY) Quote - News - Profile - Message Board - Website
+ DROOY (2.50): We hold 200 shares for 2.41, and once again no changes are advised. DROOY still needs to close above 3.03, or trade above 3.07 intraday, to light the fuse.
+ RANGY (12.82): We hold 200 shares for 10.35. We’ll put aside an upside target of 14.85 by way of acknowledging a minor-cycle downtrend with the potential to reach 12.47, a hidden pivot. No changes to the position are advised.
Royal Gold (NasdaqNM:RGLD)
+ RGLD (20.22): We hold the July 17.50 – June 17.50 call spread eight times for a 1.00 CREDIT, yielding a profit range of $800 to $1,680 regardless of what the stock does between now and mid-July. There are two supportive hidden pivots just below – at 19.98, then at 19.4 6. If the first is breached by more than 3 cents, expect the latter to be touched. We’ll do nothing further for now.
DJIA (8793.12): Yesterday’s moderate rally exceeded the 8819.96 hidden pivot I’d flagged, implying still higher prices ahead. My minimum upside target is now 9034.85, and it’ll be a good place to try shorting against the trend if the opportunity should arise.
$ JUNE E-MINI S&Ps (953.00): The futures topped exactly one point from my target, 960.50, but that was not quite close enough, nor did it happen early enough in the session, to get us short. We’ll back away, since there’s a possibility of a retracement over the next day or two. Alternatively, if 960.50 is exceeded even slightly, we should expect the futures to continue on up to at least 965.50, a hidden pivot that you can short on your own terms.
JUN BONDS (119.17): The June contract is in the throes of the most substantial correction since early April, so we’ll remain on the sidelines. My outlook for the next 4-6 weeks (please note that time frame has been extended) is still bullish, with an upside target of 124.14.
OEX (479.65): Our upside target is more vague than usual -- around 488, where two important peaks were made last year. If the OEX can close above that number for two consecutive days, however, it would become a decent bet to reach 500.38 (a hidden pivot) within 3-4 weeks.
+ QQQ (29.19): We hold twelve June 30 calls for an average 0.33 and two dozen July 23 puts for an average price of 0.175. There is upside potential to 32.35 over the next 2-3 weeks that could spell new life for our calls. For now, though, we’ll continue to sit tight.
$ JUNE NASDAQ E-MINI (1174.50): We’d looked to go short at 1190.50, but you should cancel that offer today, since it’s too close to yesterday’s high to be our kind of obscure. If the futures simply fall, the first place we should expect support to materialize is at 1170.50, a hidden pivot. Until the final hour you can bottom-fish by bidding 1170.50, stop 1169.50, but you’ll be on your own thereafter.
***
$ + IBM (87.57): We hold eighty July 105 calls for an average 0.13. Continue to offer 80 June 105s short for 0.10. If IBM falls, the closest support looks to be 86.08, a (very) hidden pivot whose provenance is perhaps to fuzzy to risk bottom-fishing there.
FNM (73.96): Fannie’s unexpectedly strong showing yesterday triggered a long entry that we will ignore, since my gut is telling me the stock has not yet corrected the March-April sufficiently. However, a close above 75.90 would be a strong sign not only that the rally is real, but that it is hell-bent on achieving a minimum 81.26 (a hidden pivot).
C (41.14): Any shorts attempted at 40.44 were stopped out for a tiny loss in the opening minutes of the session. The stock took wing thereafter as expected, and now bids fair to reach 44.67, a hidden pivot that is important enough to short if and when the opportunity should arise.
