So let me get this straight. The year is 2013, we have more computing power than we know what to do with, we've got an army of technology and computer wizards in and around New York, and the NASDAQ can't prevent a complete shutdown for a few HOURS? (Never even mind the fact that apparently there's no back-up plan.) Absolutely ridiculous. I won't get on my high-horse about it because we don't have time. Again though, it's just ridiculous. Let's get going. Gold Q&A It's not been particularly interesting this week, but since we've been pretty vocal about our recent bullishness on gold and silver - and since we have the time and room today - I wanted to update our calls on the world's two most popular precious metals. Besides, we received a reader question about our August 15th interpretation of the World Gold Council's Q2 report, and since it's a question many of you may have had, we want to answer it here in the newsletter. First things first... an updated gold chart. Long story made short, yes, gold prices did end up moving higher after our look at it a little over a week ago. It's hit another wall in the meantime though. This week, a ceiling's developed at $1380/ounce (which was something of a battleground in June, by the way). Take a look. Now, we're not particularly worried about the ceiling. We anticipate the metal pushing through that resistance in short order and moving on to the ultimate target of $1476. That was a hot spot in late April and early May, and by the time gold prices could get there the 200-day moving average line will be there too, ready to halt the advance in its tracks. That's where we should start a more significant bearish leg that carries gold to new multi-year lows under $1180/ounce. That's our take anyway, subject to adjustment and outright change a needed. Then again, we've pretty much been nailing it coming and going with gold for the past few months. I don't foresee any major alterations to the map here. We'll skip the silver chart for today, since it's following the same basic path as gold, and should hit the same wall gold's going to hit a few weeks from now. Anyway, we got a challenging question from a reader about gold that I think is worth putting out in front of all you guys and gals. Bill writes: You point out that redemptions in gold ETF have been a major factor in the decrease for the demand for gold. Does it not follow that the six week run up we have experienced in gold ETFs will result in majoring purchasing of gold by these ETFs? Let me ask you this: What will happen in the short term to the physical demand for gold if Chinese and Indian investors increase their purchasing as the fear of rising gold prices causes some minor panic buying, and ETFs are trying to buy gold for the purchases that have already been made? You just might come to the conclusion that in the next six months the price of gold (and silver) will reach new highs. I do believe this will be followed by another crash, bigger than the last but that is an opportunity as well. Thanks for the question Bill. All points are well taken. I think what it all really boils down to is a chicken-or-egg debate. Gold will only move higher if people want to buy it, but people will only want to buy it if it's moving higher, philosophically speaking. It's moved higher a little over the past six weeks on demand, but that's already reflected in ETF prices and ETF holdings, and shouldn't keep driving gold prices higher in the weeks to come. The only thing that will drive gold up from here is if demand persists now, and at some point, the panic-buying you were talking about will fade as gold prices reach that "too high" threshold. Where's that threshold? Great question. This is where things get tricky when handicapping gold prices. There are three uses for it (jewelry, technology, investment), and sometimes those three purposes are an either/or thing while other times they're not. By that I just mean demand might slump across the board, or it might slump in one area but soar in another. For instance, just because people buy gold bars directly or jewelers use it to make jewelry doesn't necessarily mean ETFs need to buy much (if any), since gold ETFs may not be the preferred vehicle to own gold. If ETFs are the preferred vehicle, than jewelers may not create much demand. Or, if gold's red hot, maybe everybody's willing to buy it for all reasons. Throw in the fact that central banks' demand has been hot and cold for the last two years and inflation has been all over the map, and what you have is a very, very messy supply/demand relationship with a ton of moving parts that makes it impossible to make finite predictions and forecasts. That's the reason I've warned for years now to be wary of anyone who utters the words "gold's fundamentals say".... g old's fundamentals are a moving target, at best. Now, I said all of that so I could say this - I don't have an answer to your question, and I don't think anyone really does. There's just no way of knowing if Indians or the Chinese are still buying gold for jewelry at gold's current piece. The only data we really trust is the overall quarterly demand data from the WGC, since that number offsets waning demand in one area (like jewelry) against growing demand in another gold area (like ETFs). After all, these buyers are all getting gold from the same supply pool, so that's the only data that paints a true "bottom line" bigger picture. Any other assumptions we make about who's buying or selling gold and how much they're buying or selling in the meantime is just conjecture. In between the World Gold Council's quarterly updates, we only trust the supply/demand clues given to us by gold's chart. Fortunately, that supply/demand dynamic behaves - visually - predictably when it's charted, which is what let us predict gold's current rebound. Hope that helps. Stock Talk As much as I like to do it here in the newsletter, we just rarely get the chance to have a chat about what's going on with the market's biggest stock-related stories. I don't necessarily mean the open trading ideas we've put on the table either. I'm talking about news-driving names that are just worth spending some time on if for no either reason than us being stock-market junkies. I'm going to force myself to make time to do it in this newsletter though, 'cause I think an opportunity gift-wrapped itself today. That opportunity is Hewlett-Packard (HPQ). If you keep tabs on HPQ at all, then you'll know the stock got crushed on Thursday after last quarter's results were released yesterday evening. All told, traders pushed Hewlett-Packard shares down about 12% today. All I can say is, big mistake. Hewlett-Packard is a turnaround story that nobody (except me) seems to believe in. Yes, PCs are a deteriorating business, and HP is missing the tablet boat, and yes, revenue was off by about 10% last quarter, and yes, guidance was discouraging. Here's the thing - it's not like anybody should have been surprised about it. More than that, it's history... not the future. It's admittedly tough to see because you or I don't use them every day, but Hewlett-Packard has raised the bar on 'big data' servers with its newly-launched Moonshot server system. These things use about 1/10th the power and take up about 1/4th the space that traditional servers use. Given how the world is still headed toward an all-cloud environment, that's going to matter to tech companies, and soon. Meanwhile, though it's unlikely the PC industry will ever get back to its glory days, Hewlett-Packard is getting stronger on the handheld front. Specifically, rather than making just one tablet (the disaster called the Slate, unveiled a couple of years ago to a very disinterested market) built as a "one size fits all" device, the company now recognizes - and is doing something about - the fact that it needs to offer different kinds of processors and different kinds of OSs in any tablet or machine it makes. It's still no threat to Apple (AAPL) or Samsung, but I think the upcoming Slate X2 could turn a few heads. It's a much more attractive machine than the Slate 7 was. Thing is, neither line of products has had a chance to prove itself yet. Add in a pinch of the fiscal efficiency Whitman has put into place, and what you get is a decent company. My point is, traders wanted to hammer it today based on yesterday's news, but the Meg Whitman turnaround is getting traction. We just need to give it another year or so to see the full fruits of the labor. I have faith the market will see it sooner than later. We're not going to add HPQ to our list of open positions; it doesn't quite fit our risk/reward/timeframe profile. But, it's tempting after today's plunge. The company's quietly wiggled its way back to being relevant, and I don't see value-hunters letting this stock stay this low for very long. Even with lowered guidance, we're still looking at a low single-digit forward-looking P/E ratio. This is one of the year's best contrarian buys so far. For What It's Worth We'll be short and sweet today since we went long with everything else above. Besides, it's still not clear what effect - if any - the NASDAQ's closure had on the market as a whole. We'll deal with the data we've got, though, because it's all we've got to work with. Yeah, the market closed higher today after dropping some fairly big bearish hints on Wednesday. However, the S&P 500's rally was unsurprisingly halted right at the 50-day moving average line just like it's been capped there every other day this week. Until the index actually clears that line there's no need to back off from our bigger bearish stance. That's really all we've got for today. Volume was light because the NASDAQ was closed half the day, and though trading resumed around 3:20 pm EST today, I suspect we won't see the pent-up flood of trades hit until tomorrow. Let's just check in again then.