Forbes online hit the bullseye with this headline Wednesday afternoon: 'Rate Cut Fails to Scare the Bears'. And why should it have? Is there an investor or speculator on earth who still believes that knocking the fed funds rate down by a measly 50 or 100 basis points will somehow arrest the global financial system's collapse? To make matters worse, yesterday the world's bourses shrugged off the central banks' best punch, falling on a day when coordinated rate cuts in Europe and North America were headline news. The Dow finished off 190 points after being down as much as 260 intraday, suggesting not only that short sellers have become inured to the nostrums of monetary easing, but that investors in general no longer believe that loosening credit will work. Under the circumstances, we might ask, what will the bankers do next? We'd seen this coming and warned subscribers with the following update posted at the web site Tuesday night: 'The coordinated lowering of interest rates around the world is now the 'story' propping up the global financial system. With global easing rumored to be imminent, why, then, did [Tuesday's] short-squeeze on Wall Street fizzle out before the session was 15 minutes old? My guess is that traders decided they couldn't wait even one more day for the easing to start. When it finally does, though, look out below if the all but obligatory buying panic turns flatulent in a mere hour or two. Trust Your Instincts 'My advice is to trust your instincts on this one. Do you personally believe that lowering administered interest rates will touch off a spree of borrowing and lending, reviving the global economy and causing institutional lenders to trust one another? That's what I thought. Then why should we expect traders and speculators around the
Friday, October 10, 2008
HUI Gold Bugs Index (203.24)
– Posted in: Current Touts Free Rick's PicksThe bad news is that HUI has breached an important midpoint pivot at 237.08 on a closing basis, implying it will fall a further 14%, to at least 174.36 (see chart), before finding traction. The good news is that if and when it gets there, we'll be able to bottom-fish aggressively with a tight stop-loss and relatively little risk. I estimate that it will take five to seven trading days for the downtrend to complete itself. The outlook would brighten on a two-day close above 237.08, the midpoint noted above, but in any event we should be prepared to short there, or to lighten long-term positions, since HUI is not likely to blow past it on the first try. ________ UPDATE: The last week's action has trashed the 174 support, putting a target of a larger order of magnitude in play: 134.17. That is now my minimum downside projection, and HUI would need to thrust above 223.51 to put it in doubt.
DJIA Dow Industrial Average (8267)
– Posted in: Current Touts Free Rick's PicksWe're using a Hidden Pivot at 8479 as a minimum downside projection. However, if it's exceeded by more than 15-20 points, that would imply more downside to at least 8162. Since it's a Friday, here's a sequence of three pivots you can use if the formerly mind-blowing target at 8162 fails to contain the selling: 7915, 7744, and 7497. You can assume that if any of these hidden supports is breached by more than 15 points, the next is likely to be reached. _______ UPDATE: The so-far low this morning occurred in a place seemingly beyond Hidden Pivot logic. However, because even the Plunge Protection Team is the unwitting lackey of these pivots, we should infer that more weakness, down to at least 7744, impends.
November Crude (82.10)
– Posted in: Current Touts Free Rick's PicksWhen we predicted that crude's price would be halved, at least, from highs near $148, we never imagined the halving would occur in a mere three months. Closing fast on the $74 threshold that would validate the forecast. November Crude looks bound most immediately for a Hidden Pivot support at 80.15, or 77.74 if any lower. That second number can be bottom-fished with a stop-loss as tight as 20 cents, but you'll be on your own if the order fills.
