March Gold has pulled back by $17, narrowly missing the stop-loss I’d suggested at 1713.10. This has not affected a bullishly impulsive pattern shown in the chart accompanying today’s tout, nor the strategy I’ve outlined for getting longer.
COMMENTARY for Friday
TODAY'S ACTION for Friday
Rick's Picks for Friday
For your guidance, I am tracking a single contract whose 1701.30 cost basis has been reduced by paper profits taken on three contracts exited along the way. The suggested stop-loss at 1713.10 is cautious but justified in my opinion, since Wednesday’s rally spike was triggered by Fed news whose impact may not linger. In fact, there was no lingering effect whatsoever on stocks, which sold off moderately. Why? The announcement that interest rates would be “held” close to zero for the next three years was about as unsurprising as anything the mountebanks and charlatans at the central bank could have ginned up in the way of a press release.
Despite the tight stop-loss, I view the latest price action in Gold as quite bullish, since the peak of yesterday’s powerful lunge created a brand new impulse leg on the intraday charts (see inset). Even so, the pullback needed to set up a second thrust could be punitive — sufficiently so to turn our theoretical gain into a loss. This I am not willing to abide, especially since we can re-enter at will any time using camouflage to keep risk tightly under control. That said, night owls can use the pattern shown to buy four more contracts. The implied risk per contract would be $350 (25% of the A-B leg) using the large pattern, so you’ll need to execute the trade camo-style at an ‘X’ entry trigger of lesser degree to keep theoretical risk below $80 or so per contract.
_______UPDATE (11:45 a.m. EST): Using the larger pattern (with a one-off A at 1703.70), entry was signaled at 1721.20. Since I’d cautioned against using an ‘X signal with such a large stop loss, we’d have looked for our camouflage opportunity on a chart of small the degree. The 3-minute chart (inset) shows how things would have played out thereof, with an entry signal at 1721.60. Notice that all three coordinates are single-bar and that the impulse leg exceeded the required internal and external peaks. Half the position (i.e. two contracts) would have been exited for a “successful” trade at the 1723.00 p midpoint of this small pattern, and a third, for a camo “winner” at the ‘D’ target 1725.70. This means the single new contract we still hold has an effective cost basis, reduced by theoretical profits, of 1715.10. Averaging that over the two contracts we hold gives us an effective costs basis for each of 1708.20. For now, use a fixed stop-loss at 1720.00 against a one-cancels-other order to exit one of those contracts at 1740.70 (i.e., 1.00 point below the ‘D’ rally target, on the 30-minute chart, of A= 1656.40 (January 25, 12:30 p.m. EST), B=1704.50 (January 26, 2:30 a.m.), and C=1703.00).
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We’ll be attempting to short this pig every chance we get, since boom times are not coming back for the banking business. At the moment, getting short means buying some put options if and when the stock reaches the 113.23 midpoint Hidden Pivot shown. Our strategy will be to turn the puts into a vertical bear spread by shorting puts of a lower strike on the pullback we expect from 113.23. Stay tuned for further details once the stock is trading above 111. Want to join us for the ride? Click here for a free trial subscription to Rick’s Picks.
Take any dozen good reasons for being bearish right now and they still don’t equal the bullishness of the chart shown. The undeniably compelling rally objective is 13085, a 4.8% move from current levels, and one can only surmise that the dusting the 12158 midpoint received on the last pullback (12/28) all but clinched a finishing stroke to the higher number. Moreover, it implies that bears shouldn’t get their hopes too high even if, in the next few days, the Dow plummets 324 points to retest the midpoint support. As of now, that would signal not weakness, but a screaming opportunity to get long. Hard to believe, really, but that’s what the charts say.
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A Really Bad Plan for Reviving the Housing Market
by Rick Ackerman on January 27, 2012 12:01 am GMT · 36 comments
For breathtakingly stupid political ideas and catastrophic “solutions” to America’s biggest problems, it’s hard to beat the New York Times op-ed page. There, joined by such jihadists of the Left as Frank Rich and Maureen Dowd, resides the peerlessly wrong-headed economist Paul Krugman, whose Nobel Prize was as well-deserved as the one Yasser Arafat received for helping to bring Peace to the world. Until yesterday, we might have thought Krugman had cornered the market for the absolute worst ideas on how to revive the economy. Here’s a guy who actually seems to believe, in his heart of hearts, that the reason this has not yet occurred is that the central banks of Europe, the U.S. and Japan have not thrown enough money at the problem. We stopped counting stimulus dollars and guarantees ourselves when the total hit $15 trillion a couple of years ago. That was long after we’d become convinced that deficit spending in such cosmic quantities, far from reviving the economy, would ultimately bury the U.S. in debt. As it has. Such concerns pose no problem for Krugman, however, since he simply avoids using the word “debt” in his Martian-friendly economic essays. » Read the full article