Step One Complete

If we are, in fact, reaching a bottom in the PMs, then today we have completed step one of our bottoming process. This morning, gold traded down to 1321.90 and silver hit 26.54. They then rebounded to about 1334 and 27, respectively. Here are 5-minute charts of each that show the day's trade:

Blythe has decided to continue hammering away in the afterhours session and I have lasts of $1329.60 and $26.74. This is perfectly fine as she is playing right into our hands.

Let me take a moment to explain the bottoming process. "V" bottoms are rare and they almost never occur after sustained corrections like we're having. What we are looking for, and what we need, is a double bottom. Specifically, in this instance I'm looking for a double bottom at roughly 1320 and 26.50. Why those levels and why a double bottom? The process goes like this, in 10 easy steps:

1) Price drops to easily recognizable support point. In this case, 1320 and 26.50.
2) Price stops there as speculators have put buy orders there to test the water and shorts have put cover orders there, too, as many use these projected support points as good places to take profits on shorts. See today's trades at roughly 8:00 am EST on both charts.
3) This rally from the projected support levels gives the bulls (us) some hope. It also strikes a little concern into the hearts of those who are still short.
4) That first rally fades as everyone in the market waits to see what happens next.
5) Market drifts back down to near support points. Thanks, Blythe.
6) Support holds and double bottom is confirmed.
7) New buying comes in as greed replaces fear in hearts of longs.
8) Even more buying emerges as fear replaces greed in the hearts of shorts.
9) Market moves out of downtrend and begins to take on look of uptrend. In this case, a move near   $1350 in gold and $28 in silver. (Don't laugh, we were just there yesterday morning.)
10) Consolidation above the double bottom low takes place and market is now poised to resume UPtrend.

So, there you have it. Watch $1320 and $26.50 very closely overnight as any serious break of those levels will have the opposite effect of that listed above and price my rapidly plunge toward the next perceived support levels near 1280 and 25. Yikes!

On the positive side, many miners look to be bottoming with the HUI about 492.
On the negative side, crude and copper are providing no help whatsoever.
On the positive side (at least historically), the dollar still looks like crap. Here is today's action:

And here is a daily chart:

That's it for now. I promise to check in again this evening, post-Harvey and we'll see how things look then. Turd out.

ps After publishing this note, I found Trader Dan's latest. Looks like we are comparing notes:
http://jsmineset.com/2011/01/25/hourly-action-in-gold-from-trader-dan-394/