*** Update 7:47 EST 1293.75 has been hit, but it's part of a lesser pattern. Be careful shorting here ***

 Two competing patterns, and neither is compelling, though the bearish one is still in charge.

 * You could try shorting 1285.75 with a very tight stop if it looks like it will stall there. *

E-Mini S&P Update

 Short-sellers may have to weather another storm before this is all over. We'll know soon enough if a great bearish leg (A-B) went to waste.

E-Mini S&P

 If the markets were looking for an excuse to sell off ..... they found one.

 Short-able with a tight stop in $219 area. If it slices thru $220 with ease, next target is in the $230's.

Physical Gold and Silver Sneeze ........

And Precious Metal Stocks Catch a Cold

 There has been a huge discrepancy between physical precious metals and the stocks comprised of this sector since early December.

 To put things in perspective, the drop in gold (I am rounding out the numbers) from 1420 to 1340 (-80) would have resulted in a loss to gold stocks from 1420 to about 1270 (-150) on a comparative basis. Almost two times the losses with gold stocks.

Gold vs Gold Stocks

 The drop in silver (again, I am rounding out the numbers) from 31 to 27 (-4) would have resulted in a loss to silver stocks from 31 to about 25 (-6) on a comparitve basis. Not quite as bad as gold at approximately one and a half times that of physical silver.

Silver vs Silver Stocks

 That's the bad news: Downward fluctuations in the short-term with physical precious metals tend to have a greater negative impact on the stocks that make up the sector.

 Is there some good news?

 Until 2008, gold stocks were quite clearly out-performing physical gold. Perhaps it's because people are more comfortable holding stocks with a brokerage firm than than they are storing gold with a bank; or having it buried in their back yard; or keeping it under their mattress. Not to mention that it's difficult for many people to come to terms with forking out all that money for a tiny chunk of metal. There is a psychological convenience to stocks, and this shouldn't be over-looked.

 With silver stocks, it's a little more difficult to gauge, as there hasn't been a one-to-one ETF similar to the GDX to use as a ten year comparison. The silver ETF SIL has only a short history. However, in looking at several different silver miners (HL, CDE, PAAS among others), the chart patterns are similar (in a scattered sort of way) to that of gold and gold stocks.

 So ..... yes (!), both silver and gold stocks have the potential to out-perform their physical counterparts, because they've done so in the past.

 However, I'll take a page from all the mutual fund companies' books and say:

 Past performance doesn't guarantee future results.

Gold vs GDX (Gold Stocks)

 The latest nosedive in the GDX has taken it below where it was sitting almost three years ago. At the time GDX hit its high in 2008, physical gold was sitting somewhere around 980 an ounce. Gold's gone up, so why is the GDX languishing?

 The top ten holdings in the GDX have - for the most part - performed terribly the past three years:

 Barrick (-)

 Goldcorp (-)

 Newmont (-)

 Kinross (from $27 to $17)

 Anglogold Ashanti (-)

 Yamana (from $19.50 to $11)

 Eldorado Gold (from $7 to $16)

 Goldfields (-)

 Agnico-Eagle (-)

 Cia de Minas Buenaventura (-)

 I am not about to research the cause behind this (we all have our theories), but when only one stock (Eldorado) out of the top ten in the GDX is ahead of where it was three years ago, there is definitely something horribly wrong with BIG gold, and Kinross and Yamana (sadly, for their share holders) have led the way.

 All is not Lost

 Maybe it's time the GDX caught up?


 Here is a bullish pattern ..... and it's pretty straight-forward.


 The pinpoint pivot (the red dotted line) was surpassed back in October. It doesn't matter that the GDX has fallen back through it, the largest upward trend is still intact.

 There's is still a bearish calculation on the GDX that hasn't quite played itself out.

 Maybe it won't.



 But, I pointed out the pattern last weekend, which technically suggests the GDX could make its way to 52.27, and maybe fall further, as a breach of the October low could set up another bearish impulse leg. There is support here, however, as the GDX did manage to bounce off the 200 DMA and there's a clandestine trendline that could offer some timely assistance. I would keep a close watch at 53.31, the low print in October, and also the Fibonacci Retracement from July's lows to the December 6th top. The GDX is fast approaching the 61.8 % retracement at 53.25



 I will mention here that because the HFT algorythm programs have essentially kidnapped the market (and continue to hold it for ransom), they are set-up primarily to bypass that which is most obvious. This is strictly a casual observation, but I am seeing more and more where these HFT algorythms are programmed to create as much confusion (ie fear) in the markets as possible. They'll often take out as many, "lines in the sand" within reach (retracements, exponential and daily MA's, horizontal and trend line support areas, etc), all with one idea in mind: separating nervous shareholders from their stocks. When they've squeezed as much blood from a rock as possible, they are then re-programmed to turn on a dime.

Something to keep in mind.

 Symmetry

 In the chart below we can see the symmetry between Big Gold and the S&P 500 since 1997: the trend lines are pretty much exact. Of course, anyone can point out that there is a huge difference favouring the GDX's performance if the trend line is started in 2000, but there are a few other pivots along the way where there is relative trend line harmony between the GDX and SPY: 2002, 2003, early 2008, 2009 and early 2010.



GOLD

 Gold is still trying to battle its way out of a short-term bearish pattern that could take it to the 1321-1322 area. Coupled with that, there was a bearish crossover on the EMA's several days ago.

 The lower trend line on the Raff Regression Channel has come into play in the chart below.

Silver

 As I pointed out Friday, silver came within 16 cents of a pivotal low. A bounce ensued, but silver couldn't hold its highs, so I would still consider the chart as, "up-in-the-air." There are a couple of price magnets still looming below .... the pivot target in the second chart below,and a long-term clandestine trend line in the third chart down. There is also the threat of a bearish crossover on the EMA's to consider as shown in the first chart. However, there are three indicators in the fourth chart setting up bullish wedges and silver is sitting on the lower trend line of the Raff Regression Channel.

 Here is a chart of the Spiders and what could possibly transpire, on a strictly technical basis.

 Much could happen, fundamentally, between where we sit today and the target presented in the chart.



 But it's not an out-of-reach, impossible scenario.


 We've already come within $6.22 of it.

SPY

 Before any of the above can possibly take place - and barring an overnight short-squeeze by the boys at the beginning of next week - there are still two bearish patterns to contend with. One (A) is sound technically, the other (B) is a little outside the boundaries of technical perfection, but could work.

  I will be watching these two bearish patterns tomorrow. I should add, however, there are supposedly 240 companies reporting earnings tomorrow, and this could simply obliterate the two patterns if Wall Street manages to find something (anything?!) good in the earnings in order to create yet another short-squeeze.

 (A) This is a fairly good bearish pattern, and the pinpoint pivot was breached just before the close. But it may have already played itself out before we even have our first cup of coffee and bran muffin Monday morning. The futures traders do as much as possible to impact the day prior to the time we can trade, and that's a very real possibility with this pattern. It may have dropped well beyond the point where there is enough reward to justify the risk by the time we turn on our computers. Alternatively, if there's a run up to as much as $128.83, the pattern will have been compromised and it will be back to the drawing board.

 (B) Imperfections aside, what I like about this pattern is that the pinpoint pivot at 127.73 sits just slightly below the target in (A) 127.79. If the pattern holds and the pinpoint is breached with some clarity, there could be a fairly substantial drop to as low as 126.28. It's a wait-and-see on this, though, and I would probably get an earful from my mentor for even pointing something like this out .... however, sometimes it's okay to think outside the box, and this does have the potential to work. I'd play the first pattern (A) and see what transpires with the initial target and the action around (B). By this stage, if the initial trade is successful, then anything the second pattern yields is a trader's dream: playing with other people's money.

 Again, it's probably prudent to wait and see how Wall Street digests the earnings reports.

The TSX 

 Naturally, if the Spiders are going to accelerate to new heights some time in the next little while, we'd have to expect that the TSX is going to join in for the ride. So, yes, I have an upside target for the TSX as well, and it projects to 14146.62

 But there's also a bearish pattern to contend with here:


 I am pointing this one out as I know most of you focus on the Canadian exchanges.



 Here, the pattern is more discernible than that of the US SPY, but a caveat (along with all the usual caveats):


 If there is a bounce in oil and the precious metals sector over the next couple of days, I doubt the TSX will come close to the target of 13077.16, and even though I think there could possibly be a little more downside to gold, silver and the stocks that make up this sector, they are closing in on a critical area where there could be a very healthy reversal. And just like the US SPY, much of the action that takes place with silver and gold also happens while we're sleeping. So, while technically, this looks like a great short on the TSX, I'd be leery of it for no other reason than we could see a big run-up on precious metals and get caught in the wake. Strictly as a day trade, however, it could be shorted Monday morning (depending on the market's mood, of course), using a hard stop at 13410. If the pivot is encountered I'd set a trailing stop between 43 and 70 points, depending on the situation.

 This bearish pattern will have been nullified if the TSX manages a print above the 13446 area, but I'd be long gone prior to that anyway, as my hard stop would have been triggered before hand.


 Despite some of the bearish patterns, anything can happen Sunday night when the overseas futures markets open for trading. We could wake up Monday morning to see silver and gold have caught fire, oil on a tear, the REE's back in action, bullish earnings, etc and this would likely push most of the sectors higher, along with the indices.


 It's rare (and a bonus) when situations turn out exactly as planned.