July 2007

When we warned recently that Apple shares might fall to as low as $134 before rallying to a potentially important high near $153, we never imagined the stock would hit both of those numbers in a single day. But it very nearly did yesterday, when stellar earnings drove bears into a short-covering panic in after-hours trading. The stock had spent most of the day struggling to recoup a nearly $9 loss on Tuesday, when it plunged, along with a very weak market, to a low of 134.15. Before the earnings news was released after the close, bulls had been unable to push quotes much higher than $138 on the rebound. But when word hit the tape that the electronics firm's profits had surged 73% on sensational Mac and iPod sales, DaBoyz let crazed short-covering do its magic. AAPL gyrated wildly in the minutes that followed, feinting first to 143.70, then plunging to 129.00. That was the day's low as well as the starting point of an even more spectacular rally. An hour later AAPL had touched a high of 151.98 ' an 18 percent move in just under 60 minutes.. So much for the patently absurd notion that the stock market prices shares efficiently. This time, its inefficiency seemed almost comical, given that no sentient adult ' other than a Wall Street analyst, perhaps -- could have been unaware of the red-hot pace of Apple's hardware sales in the last few months. For our part, we see no contradiction in the stock's hitting our worst-case and best-case targets in the space of just a few short hours. Oh, and by the way:  The 153.41 upside projection remains valid, and we wouldn't be surprised to see AAPL make an important top there. It wouldn't be the first time a stock became

We keep repeating the mantra that 'Something Has Changed.' Exactly what has changed, from a technical standpoint, is discussed below, as well as some reasons why we are quite certain now that the Fed will loosen, and soon. (Sayonara, US$!) Meanwhile, talk about ugly! Bearish as we were at the opening yesterday, the ferocity of the stock market's decline took us somewhat by surprise. We were looking for a minimum 13-point decline in the S&P futures and said so in a trading recommendation sent out the night before: 'On a weak close, the futures looked poised for a minimum 13-point fall to 1534.00, although further slippage to another Hidden Pivot support at 1531.75 would be implied if the higher number were to be breached by more than a couple of ticks.' Our intention was to bottom-fish at the lower target, but even after adjusting it downward to 1528.50 intraday, we still got socked for a small ($38) loss on a forced exit. (Click on chart to enlarge) We had warned of possible trouble in the shares of Apple as well, even though our longer-term outlook was bullish. Here's the actual Rick's Picks Tout that was sent out Monday night with the stock trading 143.70, just $1.50 below its recent all-time high: 'Word that iPhone is vulnerable to hackers seems not to have much slowed the pace of AAPL's ascent. For the record, our current minimum upside projection is to 153.41, a Hidden Pivot that comes from the monthly chart. However, the midpoint support associated with the target is down at 134.40 and, as always, a pullback to that number could occur at any time.' As indeed it did -- with a vengeance. Apple recorded a low of 134.15 on Tuesday, leaving us a tad less eager to buy aggressively at

Is anyone else creeped out by the fact that financial stocks have failed to get in gear with the supposed bull market? We experienced this ominous divergence first-hand yesterday bottom-fishing in the shares of Wachovia [NYSE symbol: WB]. For the last couple of weeks, we've been expecting WB to fall to exactly 49.11, a Hidden Pivot support. However, a short squeeze intervened, testing our patience as it pushed the stock to 53.02 on July 13. We've been waiting ever since to get long at our price and were finally able to do so yesterday. However, Wachovia looked so dismal as to make us wonder whether we should be more careful about what we wish for. (Click on chart to enlarge) Actually, for Wachovia shareholders, the day didn't start out too badly. In the opening minutes of the session, WB gapped to a high at 50.44 that was 46 cents above Friday's settlement price. But the rally quickly faded, and the stock fell hard after DaBoyz finished raping those who had gotten long at the opening bell using market orders. For anyone who mistook the early action for real strength, the day could have been a disaster. By the final bell the stock had fallen $1.68 below the intraday peak and a whopping $3.74 below the equally spurious peak created by last Friday's gap-up opening. Wachovia: Trouble Ahead? Mind you, Wachovia is not among those companies whose Q2 numbers have disappointed the Street; in fact, profits reported on Friday were up by 24 percent. But forward-looking investors noticed not the scintillating performance of months past, but the problems likely to attend Wachovia's recently expanded mortgage portfolio as the housing market has continued to weaken. Similarly, the shares of Citi, no slouch in the lending department, disappointed yesterday, even though it too had

No sooner do we get done trash-talking Google than we hear they may be jockeying to take over the country's (the world's?!) cell phone business. If such an ambitious coup sounds implausible, click here for a persuasive prospectus from one Don Reisinger, writing for C-Net news. All they've got to do, says Reisinger, is win the FCC's upcoming auction of 700MHz wireless spectrum ' as how can they not? -- and the takeover will be as easy as shooting fish in a barrel. Few would challenge the assertion that Google has the competency and self-assurance to pull it off. But even more compelling, writes Reisinger, 'is the nature of the relationship between Google and telecommunications companies. Not only do they basically hate each other, they sit on directly opposite sides in the debate for Net neutrality. Simply put, I think Google would love to significantly damage these companies.' Has Gordon Gekko returned from the 1980s wearing sandals, a Gap Tshirt and cargo pants?  For all we know, Google co-founder Sergey Brin eats guys like Gekko for breakfast. But he's not known for such toughness, and if Google has the jugular instinct, it has been nicely camouflaged by the calliope of colors in the company's logo, as well as by the 'Who, us?' demurrals when asked whether some of their Web-based applications have specifically targeted Microsoft's Office suite. Reisinger's provocative think-piece came too late on Friday to save GOOG from the 50-point thrashing it received after the company reported earnings that fell every so slightly shy of the Street's perversely all-important expectations. However, by day's end, the stock had recouped more than 20 points of it.  That will likely suffice to have scared the bejeezus out of shorts, and to coax forth some panic buying by them when GOOG starts trading on Monday morning.

We gave up trying to pick the Mother of All Tops when the Dow Industrial Average blew past a major target of ours at 13045 last April. As early as 2004, one could have seen this bullish explosion coming when the blue chip index tripped a major 'buy' signal of ours at exactly 10542. The predicted 2,500-point rally seemed pretty farfetched at the time, especially considering that the engine of the U.S. economy, real estate inflation, was beginning to leak air by 2005. In retrospect, Colorado-based quant Bob Bronson appears to have been the only forecaster around who was able to describe the nascent trend statistically. As early as two years ago, he was practically shouting it from the rooftops, joined by our friend Jas Jain, a provocateur and steadfast deflationist whose trenchant real estate reports 'from the front' ' i.e., California -- circulate widely on the Web. (Click on chart to enlarge) So what of it, now that the Indoos have hit 14000 for the first time? We must confess that we were unable to imagine stocks would 'go vertical,' gaining more than 2,000 points in the last year alone, as the housing sector sank into its worst funk since the Great Depression? We were too busy making dire predictions to take the rally seriously, even if Hidden Pivot analysis had afforded us little wiggle room for doubt. Our Worst Nightmares And now, the odd thing is that some of our most dire pronouncements appear well on their way to being fulfilled. The most immediate of them, and potentially the most devastating to the consumer economy, is the tightening of the screws on debtors. We wrote here a long time ago that, at some point, a 'low' 6% mortgage would become a crushing burden to most homeowners. We are nearly

It took the XAU Gold & Silver Index four months to reach a Hidden Pivot resistance at 152.98 and only two hours to demolish it. How bullish is that? Very. We generally try to tone down our precious metals forecasts, since bullion's rallies over the last year-and-a-half have done little but disappoint. Indeed, for all but the most patient gold bugs, there have been too many false signals, almost, to endure. But we think yesterday's thrust could prove to be the start of something big, for two reasons. First, as we noted above, it swept aside in mere hours a Hidden Pivot obstacle that we might have expected to hold back the tide for at least 2-3 weeks. And second, as you can see in the chart below, the rally created a robustly bullish impulse leg on the weekly chart, surpassing three prior peaks in a single bound. (Click on chart to enlarge) This is no small feat, technically speaking, and it has set the stage for a potentially much larger move to as high as 210.92, roughly 37 percent above these levels. If the price of physical gold were to keep pace, that would imply a push to as high as $921, and to around $18 for silver. The $921 target, a Hidden Pivot, lies within $14 of the $907 target broached here yesterday. We estimated that it had an approximately 40 percent chance of being reached within the next 4-5 months, but I'm going to raise the odds to 50 percent and allot more time ' six to eight months instead of the five to seven months originally estimated. What could cause bullion to break out after 18 months of tedious consolidation? We really don't know. But if it is predictive of a commensurate rally in oil prices

Crude oil at $100 a barrel? Someone wanted to know whether we were joking when we broached the possibility yesterday in the Rick's Picks chat room. From a Hidden Pivot standpoint, prospects over the next few months are not quite that scary, since the highest target I can predict right now with any confidence is a 'mere' 88.68. Significantly higher projections are of course possible, but we prefer to forecast stocks and commodities one target at a time. This helps us anchor our predictions firmly in conservative technical logic, as opposed to simply fabricating pie-in-the-sky numbers that some of our subscribers might be pleased to hear. On that basis, incidentally, Gold has a 40% shot at $907 per ounce over the next 4-5 months, or even $959; however, using Hidden Pivots, there is no empirical basis for asserting that $2,000 gold, or even $1,000 gold, is likely. (Click on chart to enlarge) Not so, $100 oil. In fact ' again, from a Hidden Pivot perspective ' a rally to at least $88.68 would become an odds-on bet were the August contract to close above 69.61 for two consecutive bars on the monthly chart. The futures have already fulfilled half of that requirement, recording a June close of 70.68. Now, with just a dozen trading days remaining in July, and August Crude currently trading around $74, it appears fairly likely that our criterion will be met. In the meantime, no matter how high oil goes we can trade it from the long or the short side as opportunity dictates. Counterintuitive as this may sound, it's a lot tougher to pick risk-averse entry points for getting long than short. That's simply because 'everyone' knows oil is headed higher, and 'everyone' therefore would rather be long than short. Oil's role in preventing 'everyone'

I was away from my office and the Rick's Picks chat room Monday, returning from a weekend with a college buddy, Peter Ricciardelli, who lives in Telluride. The loop that I drove took in some of the most scenic vistas in the Rockies. On Saturday morning, I had dropped my son off for a week of kayaking on the Green River in Utah. We arrived at his rendezvous point a little early, and I mistook a rugged-looking bunch of smokejumpers for kayakers. They had come to Grand Junction, Colorado, from Utah but were being redeployed to Washington State, where, they said, some bad fires had recently erupted. After depositing my son with his river group I headed south to Telluride, pulling into town just as the sun's last, brilliant rays were setting the peaks ablaze. The next morning, Peter and I went aloft in his single-engine Cessna, taking in the scenery from around 17,000 feet. The view from this height is quite different from the one we see from commercial jetliners, which typically fly at more than twice that altitude. Our 45-minute tour overflew the Silverton-Durango train line, a narrow-gauge railroad built in the 1880s to haul ore from the San Juan Mountains. It's one of the top tourist attractions in Southwestern Colorado, and although my wife once worked as a guide for tours that came through that area, we've yet to take a family ride aboard the coal-powered Silverton-Durango train. No Surprises I arrived home early Monday evening, having failed by precious minutes to beat the Denver rush hour. The markets appear to have done little in my absence. We were looking to get short in a few select vehicles, but only Google among them made it to its rally target. This implies the broad averages will soon be

In the column I wrote years ago for the San Francisco Examiner, I once conjured up 'Monsters from the Id,' a reference to the 1950s sci-fi classic Forbidden Planet. The film, based on Shakespeare's Tempest, delved into the mysterious downfall of Krell civilization on the planet Altair 4. The Krell had reached the very pinnacle of technology with the creation of a reactor that could materialize their every need. Craving a magnum of 1961 Lynch Bages to wash down that steak au poivre? No problem. Just picture a bottle of the stuff sitting on your dinner table, and ' presto ' there it was. We've learned to do a trick like that here on Earth, and it has enabled us to create trillions of credit dollars out of thin air. Need $26 billion to buy an international hotel chain? No problem -- your investment banker can summon it for you electronically with the speed of a genie. Lusting after that luxurious office building on Park Avenue? Check your bank account ' a $500 million stake will be deposited within the hour. To say that the financial alchemists have mastered this game would be an understatement. In fact, they materialized nearly a trillion-and-a-half dollars for private equity deals and LBOs in the last twelve months alone. Some big lenders, TIAA-CREF among them, are growing skittish, and even Moody's has begun to sour on the orgy of funny-money buyouts. But given the irresistible incentives to consummate a deal, any deal, it's clear that nothing short of a financial crash is likely to slow the mania down. Think about it. If you could buy the Hilton hotel chain for little more than it would cost to have a dozen lawyers gin up the paperwork, wouldn't you jump on it? That's what the Blackstone