January 2007

Most mining stocks couldn't hold onto the modest gains they'd racked up early in yesterday's session, but before you sink into despair take a look at the chart below: What it shows is a promising impulse leg in January ' a rally that for two solid weeks never gave up ground for more than a single day. The rally also surpassed three prior peaks in the process, or 1.5 more peaks than needed to qualify as a bonafide impulse leg. The implication is that any correction from this point on is just that ' a renewal phase to build thrust for Gold's second push above $700 since the 1970s. The correction so far has shaved a little more than two percent from last week's high of 661.50, touching a low yesterday of 646.60. The pullback need only have reached 654.90 to be considered adequate to set the stage for another bullish surge. However, the current weakness could come all the way down to as low as 631.50 without cause for concern. That last number would be equivalent to a 0.618 retracement of January's impulse leg. *** Q&A at GoldSeek I'll be conducting an open Q&A forum at GoldSeek.com this Thursday, the second such session in a continuing series. During the first half of the planned hour-long session I will answer questions about stocks, indexes, options and commodities that you have e-mailed me in advance. You can do so by clicking here or by pointing your browser to the following URL: http://www.goldseek.com/chat.php. To actually enter the chat room for the real-time Q&A that will follow, you should pre-register by clicking here or by pointing your browser to this URL: http://www.goldseek.com/chat/. Readers might also be interested to know that my daily essays on a wide variety of topics will continue to be

It's hard for me to conceive of eager buyers lining up to score a PC loaded with Vista, the new operating system from Microsoft. But then, I've never been able to understand why people would queue to pay good money for tickets to a Madonna concert. Or opt for a $100 enema at a spa. Still, when Dell starts taking phone orders for Vista-loaded computers this weekend, there are bound to be delays getting through. Dell says some of the first customers could have their new PCs as early as Tuesday. Then, presumably, the lucky buyers will be able to load Office 2007 onto their hard drives and whip any geek on the block. At least for a while. (Click on image to enlarge) But the rest of us should be hoping third-party vendors will find clever ways to keep our WinXP systems running well into the next decade. Personally, I feel like I need Vista and Office 2007 about as badly as I need ringworm. The early reviews suggest that the new Office suite is very different in look and feel from the existing application, and that it will take a lot of training to bring office workers up to speed. Given that most PCs used for business run on Windows, we might anticipate that the shift to Vista will exert a statistically noticeable drag on the nation's GDP. Would it be churlish to hope instead that Vista turns out to be the first operating system from Microsoft to lay an egg? Something to wish for, for sure. But I wouldn't count on it. *** Why Are Rates Rising? We often find ourselves stifling a gag, or at least a snicker, whenever the conventional wisdom about the U.S. economy is being served up with straight-faced seriousness on CNBC or in

The latest news from our bird flu correspondent, Erich Simon, is grim. Across Asia, and in parts of Europe, most recently in Hungary, birds are literally dropping from the sky. This is a strain of virus that kills with such alarming speed that Erich has inferred it must have come from a laboratory. He attributes the drop in the U.S. stock market yesterday to growing unease about the possibility of a global bird flu panic. I'm not so sure myself. If yesterday's 120-point plunge in the Dow Industrials turns out to be the beginning of a major selloff, I'd be more inclined to attribute it to growing unease about the housing market and its possible impact on an economy that is poised for a debt deflation. News that existing home sales in 2006 fell 8.4%, the fastest pace in 17 years, should have unsettled the rank imbeciles who actually believe the worst is past. Bird flu jitters ' or fear of economic collapse? Take your pick Below is Erich's report: 'People are dying in numbers too great for me to continue to monitor. Last night's sell-off in the Shanghai (per my prediction to you of some weeks ago and today on CNBC touted as "the short-selling opportunity of a lifetime") along with today's trip digit loss in the Dow is indication that we are indeed preparing for an increase in the pandemic alert. Good cop Anthony Fauci's remarks above are blaring acknowledgment that the situation has turned for the worst. 'Too Obvious' 'Today in 'Bird Flu Plague' torn Vietnam another flock of birds died in mid-flight and fell onto rooftops, in backyards and onto streets. Forty-nine of the recovered carcasses were presented to the authorities who made the on-the-spot assurance that it wasn't HP H5. And in Austin, Texas, our

Gold's rally since the beginning of 2007 is most encouraging, but how can bulls be sure they won't get sucker-punched yet again if they climb aboard at current levels? Using judicious trailing stops and nailing down partial profits is an obvious answer. But another is paying close attention to each rally leg, noting in particular how many prior peaks it has surpassed on the daily chart. Below, I have reproduced a daily-bar graph of Comex April Gold that shows five such peaks that will dictate our analysis in the weeks and months ahead. Note that, with yesterday's strong surge, the futures have exceeded peak #1, as well as a very minor peak labeled 'X'. This modest feat has created a bullish impulse leg of daily-chart degree, but it is only a weak impulse leg so far. To be confident that there is sustainable power behind this rally ' enough, perhaps, to drive bullion quotes to new all-time highs -- we should stipulate that the current thrust continue, without a pullback lasting more than a single day, to exceed at least two more peaks (#2 and #3). That would leave little doubt that the correction begun in May had ended, although it would take a push above peak #5 (a mere dot on this chart, albeit a significant one from a Hidden Pivot perspective) to definitively end Gold's long wallow. *** London Seminar A Hidden Pivot seminar in London appears likely, judging from the strong initial response. If you're interested in attending a two-day class there, probably sometime in the spring of 2007, please let me know via e-mail, including your contact information. The cost would be $1,500 USD.

Speaking as a permabear who sees no chance whatsoever that the U.S. economy will be able to avert a deflationary collapse within the next few years, you can probably imagine what a delightful diversion it has been for me to have had reason to tout an extravagantly bullish, 13045 target for the Dow Industrial Average. The target is a compelling Hidden Pivot that comes from the long-term charts, and I first promoted it late last summer under the headline, 'Is Dow Staging/For a Moon Shot?' At the time, the blue chip average was trading more than a thousand points lower. So far, it has come within 431 points of the target, topping last week at a marginal new high of 12614. From a purely mechanical standpoint the target is still valid, since the 'midpoint' pivot with which 13045 is associated was bulldozed months ago by the still-rampaging bull. Even so, we are impelled by the stock market's recent behavior to remind ourselves that 13045 is a prediction, not a promise. Start by recalling the headline atop yesterday's commentary: 'Dirtball Indicator Points to a Rally'. In case you missed the original analysis, the 'dirtball factor' was said to be evident in the form of footprints on Citigroup's intraday charts. Specifically, where signs of distribution were clear just a couple of weeks ago, more recent price action in the stock strongly hinted of accumulation.. Citi Bucks Trend There was obviously some merit in this observation, since Citi was one of relatively few stocks that bucked yesterday's broad weakness in the averages. Indeed, at one point the stock's behavior seemed anomalous, since it was up more than a dollar when the Dow was off nearly a hundred points. But one stock, even a key bellwether like Citi, does not a market make, and

Citi shares have been out of favor in recent weeks, but there were signs on Friday that the stock may soon be ready to lead the broad averages higher once again. We have always maintained that as long as the bank stocks continue to advance, bull-mania on Wall Street would keep chugging along. It seems logical that such stocks would tend to outperform most others in an economic environment that allows purveyors of smoke and mirrors to thrive almost effortlessly. How can they lose, given that a bank's cost of goods (aka 'money'), thanks to the yen carry trade and other financial legerdemain, is practically zero? For contrast, just look at the eternally sagging chart of Ford Motor (above) if you want to see what can happen to a company that persists in manufacturing actual, real products. Indeed, why should anyone get one's hands dirty on an assembly line when it's possible to create, market and distribute securitized-debt products merely by tapping out words and numbers on a computer console? And there's all that leverage, too. Even in the case of Ford, it is not those shiny new cars rolling out of Dearborn that make the company's shares worth something, but rather the securitizable debt-paper generated by the auto manufacturer's sundry activities and financial obligations. Anyway, getting back to Citi, notice in the chart above how, one day a couple of weeks ago, the stock opened on a manic high, only to fall ever since. The price peak lasted for just a few minutes, but that was sufficient to enable the dirtballs who make their living manipulating the opening each day (full disclosure: I was a floor trader for twelve years) to unload all of their unwanted stock. On Friday, however, we witnessed just the opposite: Citi opened lower on

One of the most useful tricks taught at the Hidden Pivot seminar is the 'look-to-the-left' rule. To apply it, simply fix your eye on a rally peak, then move backward in time along the chart. If it turns out that the new peak has surpassed at least two prior peaks to the left of it, we can confidently infer that the rally has further to go. More bullish still is a rally that slightly exceeds a prior peak that is either visually obscure or which occurred so long ago that it is no longer on the radar of conventional chartists. (Click on charts to enlarge) In Hidden Pivot-speak, we say that such rallies have renewed themselves by creating fresh bullish impulse legs on their respective charts. In the chart above, when the shares of Merrill Lynch hit a high of 81.25 last April, they slightly surpassed the previous all-time high of 80.00 made more than five years earlier. Thus did the final gasp of that rally manage to conquer yet one more previous high ' as well as the three others labeled on the chart. This feat ' surpassing two or more prior peaks without taking a breather ' quite often distinguishes strong rallies from those that are destined to fail. Viewed another way, we might say that any rally that is worth a damn should, with its final gasp, be able to take out one last peak to the left of it ' and no matter if that last peak is visually obscure, or if it is exceeded by only a very small margin. All of which brings us to the chart immediately above, of the E-mini S&P. As you can see, although the most recent rally surpassed two prior peaks, it failed by an inch to knock off

After watching Jim Cramer's 'Mad Money' on CNBC yesterday for the first time, I'm forced to admit that he's not all blather. Actually, it was the first time I've tuned to Cramer with the sound on, although I've watched him soundlessly many times on the hermetically sealed sauna-room TV at the local gym. Even with the sound off, you'd swear you can hear the guy, since practically every word he utters is punctuated by the kind of body language and wild-eyed emphasis that makes us all lip readers. His latest rant was a warning to bail out of tech stocks now, since the calendar all but decrees that most of them will be falling between now and August. Could smart investing be that simple? Perhaps, at least in this case. 'Follow the herd' on this one, Cramer advised. I don't have a copy of Yale Hirsch's Stock Trader's Almanac handy to affirm the wisdom of this advice, but it seems well in line with my own forecast for a key tech bellwether, Intel. Here is what I wrote in Wednesday's Touts: There's a compelling Hidden Pivot rally target at 23.50 that we'll attempt to short through tomorrow. Bid for two Feb 22.50 puts (NQNX) using whatever bid is reflected for them when the underlying stock first touches 23.45 on the way up. This is a day order, no stop-loss. The target comes from the daily chart, where A=19.03 (9/25/06) and B=22.50 (11/17). In the event, we were a day late, since Intel opened on a gap lower due to disappointing earnings. The failure of the stock to surpass November's key high, thereby creating a fresh, bullish impulse leg on the daily chart, will likely mark the end of the bull run begun last June. As Intel goes, so go the

For once, a winter storm appears to have missed Colorado. There's still plenty of snow on the ground here in Boulder, but not much on the roads, and the ice storm that has blanketed about a third of the U.S., from Texas to New England, is wreaking most of its destruction well to the south and east of this snow-weary region. Imagine waking up to icicles as far south as San Antonio. Or dealing with San Francisco's hilly streets when they're even a little bit slick. So much for global warming. The freakish cold snap, now in its fifth straight day, looks like it's going to destroy at last half of California's citrus crop. One thing the cold weather did not do was reverse the relentless slide of crude oil quotes. I'm still projecting a low of 45.32 for the February contract, and yesterday's price action did nothing to alter the forecast. Even so, we can try bottom-fishing with relatively little risk as it continues to fall. The nearest Hidden Pivot support lies at 50.86, and I've provided detailed instructions for leveraging it in Wednesday's Touts. Actually, this one's for the night owls, since the support will likely work best if its kissed in the wee hours. If it fails, though, the next spot where we might look for a turn is at 50.29, another minor Hidden Pivot. Please note as well that a 51.44 print would abort the trade, while a rally touching 51.70 would hint of a resurgent bull, at least for the near term. *** London Seminar A Hidden Pivot seminar in London appears likely, judging from the strong initial response. If you're interested in attending a two-day class there, probably sometime in the spring of 2007, please let me know via e-mail, including your contact information.