Rick's Picks
Monday, April 19, 2004
For investors who'd rather be smart than lucky
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Gold, Dollar and Euro
Perfectly Aligned for Reversal
I usually leave intermarket analysis to my friend Kevin Klombies at IMRA, but this time I'll take a crack at it myself, since the dollar, euro and gold are approaching their respective hidden-pivot targets as though guided by collusion. If everything works out with celestial precision, gold and the euro should be headed decisively higher within the next two to four days, the dollar decisively lower.
Those of you who have been monitoring my daily updates closely will already know that gold, in the form of the June Comex contract, was the first to arrive at its predicted destination, 396.10. The number was initially broached here a while back as an important support, since any rally occurring from beneath it would presumably be destined to fail. To explain briefly, a 396.00 print would have created a bearish "impulse leg" whose influence would likely have dominated for three to five weeks or longer. As it happens, the June futures bottomed at 396.20 following a two-week slide from 433. That was perilously close to the brink, to be sure, but two ticks made all the difference, since they provided sufficient margin to leave the March 12 low at 396.10 technically intact - and therefore, no impulse leg.
Don't Dare Exhale
While it might be tempting the Furies to exhale a sigh of relief right now, we can still contemplate in appreciative silence a stochastic picture that is rapidly evolving from benign to felicitous. Oversold indicators associated with June gold's daily chart have begun to roll up from extreme depths and would turn into virtual thrusters if the futures can merely hold their own over the next few days. The incipiently bullish look of gold's chart is corroborated by the dollar's inversely toppy chart. The June dollar contract is just inches shy of a hidden-pivot resistance at 92.46 with the potential to terminate the bear rally begun in mid-January. I have provided precise coordinates for getting short there, as well as corresponding pivots for the NYBOT Dollar Index.
Completing this speculative picture of synchronized trend reversals in the making is a June euro that for the last three weeks has been tracing out a powerfully bullish stochastic pattern on the daily chart. Specifically, there have been three distinctly lower prices bottoms during that period, each with a corresponding stochastic bottom that diverges relative to the two others. This formation is somewhat rare, but its strongly positive implications for the euro are unmistakable.
Watch the Dollar
With the euro very likely about to head higher and the dollar close to a potentially important top, gold's tentative bottom begins to look more and more like the real McCoy. This analysis is highly speculative, of course, since it relies on three subjective indicators confirming three others. Even so, their synchronicity is too precise to ignore. Since my hidden pivots work out with two-decimal precision if at all, we'll know soon enough whether they are correctly forecasting an important bottom for gold. Since gold and the euro have already lifted from their respective lows, the dollar is the one to watch. My hidden-pivot target for the June contract is 92.46, and if it is exceeded by more than a few hundredths of a point, that would be akin to the groundhog seeing his shadow, foretelling yet more wintry weeks ahead for gold.
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JUNE COMEX GOLD (401.30)
Friday's final-hour push stalled at 402.50, less than 50 cents from a hidden-pivot resistance at 402.90 that must be surpassed either today or tomorrow to refresh the minor-trend rally. If the Junes succeed, they'll be bound for a minimum 405.80, my immediate upside target. It would also create a new, bullish impulse leg with the potential to propel the futures an additional $9-$12.
SILVER MAY COMEX SILVER (7.145)
My immediate upside target is 7.355, a tad below the 7.38 print I'd said would be needed to make the bull feisty once again. The stochastic picture shows a daily chart ready to turn supportive, but a "weekly" with some nasty divergences that could take several months to correct.
JUNE DOLLAR (90.24)
The June futures are bound for a hidden-pivot tally target at 91.17, and thereafter to a more important one at 92.46 that could end the two-month-old bear rally. (Note: The equivalent target for the NYBOT Dollar Index is 92.30.) We'll want to short this vehicle if and when it gets to 92.46, but for now we'll remain on the sidelines. I'll note for perspective that it would take a print at 102.16, roughly 13% above these levels, to convince me that the two-year bear market in the dollar was over.
JUNE E-MINI EURO (1.1960)
The June mini-euro has an unfulfilled correction target at 1.1804 that is inversely analogous to the rally target I've projected for the June dollar. This hidden pivot has the potential to produce a major turning point, although there is one lower hidden pivot at 1.1641 that is also a possibility. I'm quite confident about both of these numbers, so keep them well in mind. Stochastic indicators on the daily chart are close to forming a rare, triply diverging bottom relative to corresponding price bottoms recorded respectively on March 29, April 6 and April 14.
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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 © 2004, Rick Ackerman. All Rights Reserved. www.rickackerman.com
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