Anyone who was worried that the stock market had taken leave of its senses should have felt greatly relieved after yesterday's 733-point drop in the Dow Industrials. Added to the plunge from the previous day's fleeting high at the opening, the Indoos have now given back 1264 points of their ill-gotten, 1900-point gain from Monday's low. Could it be that Wall Street isn't so crazy after all? (Click on image to enlarge) Some have attributed the latest bout of selling to scary numbers from the retail sector, others to the mounting specter of recession-or-worse, or even to the prospect of the left-most member of Congress becoming our next President. But we'd like to think investors are focused on the more immediate, and worrisome, matter of what will happen next week when insurance payments on several hundred billion dollars worth of Lehman default swaps come due. As the Wall Street Journal noted yesterday, 'No one quite knows who owes what and if they're good for it.' Indeed. Small wonder, then, that Paulson and Bernanke have been working so feverishly on the final details of their latest handout to the banks -- a $250 billion 'injection,' as it is being called. (We will have more to say about this in the days ahead, and if you'd like to receive Rick's Picks commentary free each day by e-mail, just click here.) $250B Divided by 9 The $250 billion will be apportioned among nine banks, and although this sum would have been considered a big number just two months ago, these days it is just pin money -- an indeterminately small, and presumably ineffectual, handout coming from who-knows-where. Our take is that, spread among the nine banks, it won't be enough to cover even three days' worth of bad news from the banking sector,
Thursday, October 16, 2008
C Citigroup (16.25)
– Posted in: Current Touts Free Rick's PicksWe hold eight Citi December 25 calls (CLE) acquired yesterday for 0.43. We did so on the opening, riding a market-maker bid pegged so criminally low that, even when the stock plummeted later in the day, our options lost only a nickel in value. We'll hold onto them for now while continuing to offer eight (not four, as stated earlier) October 20 calls (CJD) short for 0.39, g-t-c. My goal for this gambit is to produce a profit of at least $800 and to have no risk in the position by Thanksgiving. We'll likely need some help from Paulson, though, in the form of some extravagant giveaway to Citi, which otherwise is headed to the grave. Most immediately, the stock looks bound for a minimum 15.38, a Hidden Pivot that you can bottom-fish at your discretion with a very tight stop.
DJIA Dow Industrial Average (8578)
– Posted in: Current Touts Free Rick's PicksHidden Pivots aside, lows made six years ago in the range 7200-7400 represent serious support, since a penetration of the lower number would erase the gains of one of the greatest bull runs in U.S. stock-market history. Most immediately, the Indoos face jeopardy down to at least 8294, a midpoint Hidden Pivot support that you can replicate on the daily chart with these coordinates: A=10883 (10/01), B=7883 (10/10) and C=9794. Plug these numbers into you calculator and you'll see that, if the support is decisively breached, it would portend more downside to as low as 6794 -- or perhaps even to 6194 if a higher point 'A' comes into play.
November Crude (73.36)
– Posted in: Current Touts Free Rick's PicksDuring yesterday's real-time tutorial session we looked at three bearish Hidden Pivot targets that appear likely to play out sequentially over the next 3-4 days. Here they are for the benefit and guidance of all subscribers: 72.10, 70.93, and 68.90. The accompanying chart shows how these numbers were derived. If you bottom-fish any of them, a stop-loss of 20-30 cents is suggested. ______ UPDATE: So much for the 3-4 days I'd allotted for crude to do its thing. Today's wicked downdraft took out all three targets enroute to an intraday low at 68.57, just 33 cents beneath the worst-case pivot. The overshoot is small but significant enough to imply that we have not yet seen a bottom.
Silver December Silver (10.250)
– Posted in: Current Touts Free Rick's PicksIn night trading, the December contract looked set to probe a midpoint Hidden Pivot support at 9.960. Its provenance -- a one-off 'A' from the hourly chart, is shown in the accompanying chart. A decisive breach of that number, or a two-day close beneath it, would imply more downside to at least 8.725, or 8.300 if any lower. Alternatively, it would take a thrust today exceeding 11.870 to turn the hourly chart decisively bullish.
