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-- Posted Wednesday, 22 April 2009 | Digg This Article | Source: GoldSeek.com

Rick’s Picks

Wednesday, April 22, 2009

“Phenomenally accurate forecasts”

With the stock market giddy as ever yesterday, gold held up surprisingly well. The June Comex contract was off just slightly even though Dow Industrials tacked on 128 points. Ordinarily, with the broad averages in a moderate short-squeeze, we would have expected bullion futures to give up more of the gains they’d achieved on Friday. In a bigger picture gold looks even more impressive, since it has fallen by only six percent while the Dow has risen 24 percent since the bear rally began on March 6.

The inverse correlation between gold and the stock market has become so pronounced lately that a nimble trader could practically arbitrage one against the other tick-for-tick. Why should gold and stocks be moving in opposite directions these days?  The reason is simple: Gold has at last come to reflect anxiety about the true state of the global economy, and there are times like now when that anxiety momentarily abates. Gold bugs can only sit patiently on the sidelines, amusing themselves with the high and low comedy that will always accompany bull traps like this one.  For instance, there is the amusing story of how Citi’s trading desk made a whopping $4.69 billion in the last quarter, even though the bank lost money in every other area of its operations. Basically, the bank bet heavily against itself and won. Our friend Dan Denning at The Daily Reckoning lays out this fascinating tale in all of its louche details, so if you want the full story, click here.  

June Comex Scorns Target

Getting back to gold, we are impressed with the way it has absorbed the body blows of stock market rallies such as yesterday’s. We should also note that the June Comex contract has stubbornly refused to pull back to an 845.20 target that has been our minimum downside projection since mid-March. We still think that number will be hit before gold can base for another serious shot at $1000, but the already bullish outlook for the intermediate- and long-term would brighten further on a thrust that surpasses 911.80. That would turn the hourly chart bullish -- the moreso if it were to occur with the backdrop of a hellish decline in the broad averages. There is so much silly thinking and egregiously misplaced optimism in this bear rally that the next leg down is likely to be a real humdinger.

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Rick's Picks publishes a daily trading newsletter for gold, stock, commodity, and mini-index traders 240 times per year. Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers' initials will be used unless express written permission has been granted to the contrary. All Contents © 2009, Rick Ackerman. All Rights Reserved. www.rickackerman.com 

-- Posted Wednesday, 22 April 2009 | Digg This Article | Source: GoldSeek.com

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