Years from now, when the Dow Average is wallowing below 3000 and we hear some windbag brag about how he made a fortune shorting the bear market the whole way down, we’ll remind him of the short squeeze that occurred on October 28, 2008. The rally was Mr. Market’s way of telling bears that it’s not always possible, let alone easy, to make a pile of dough by betting on the sure thing. And we do think that the ongoing collapse of the stock market is a sure thing, even if there will always be interruptions such as yesterday’s. But when the hubris dies down, stocks will still be in a bear market, the economy will still be slipping into the deepest bog since the 1930s, most of the largest banks in the world will still be verging on failure, home prices will still be dropping like a brick, and credit deflation will still be threatening to asphyxiate borrowers and lenders alike. (Click on charts to enlarge) In short, nothing will have changed �' even if Kudlow is saying that the stock market, supposedly prescient as always, has glimpsed recovery in 2009. In fact, the stock market is about as prescient as a meatloaf, and nascent bull markets do not so much predict economic recoveries as engender the psychological changes that cause them. We are confident this cyclical turn will occur eventually �' just not before the Kondratiev cycle’s scheduled bottom around 2015. In the meantime, we’d suggest that speculators do breathing exercises while contemplating a monthly chart of the Dow Industrials. Note in candlestick rendition above that Tuesday’s maniacal short-squeeze did not recoup even half of October losses represented by the final bar. That would require yet another thrust to at least 9368 -- 303 points above Tuesday’s settlement
Wednesday, October 29, 2008
DJIA Dow Industrial Average (9065)
– Posted in: Current Touts Free Rick's PicksWhen I proffered a 9050 target in the chat room yesterday with the Dow trading 600 points lower, I didn't imagine it would be reached in mere hours. Be that as it may, the target is a Hidden Pivot midpoint, and the fact that it was exceeded by 30 points intraday means its 'D' sibling at...9955 (!) is now in play. But before we give the bull the further benefit of the doubt, let's stipulate that the rally touch 9383.40. That would be solidly impulsive on the hourly chart, surpassing an "external" peak along the wall of last week's decline. The 9955 target sounds a bit extreme to me, since I cannot conceive of anyone, even panic-stricken shorts, finding a rationale for buying at those levels. However, one should never underestimate the potential of a short-squeeze, especially in such very interesting times as these.
HUI Gold Bugs Index (172.69)
– Posted in: Current Touts Free Rick's PicksThe 134.17 target given here earlier is dismal to contemplate, so we'll look on the bright side today instead. And there is potentially good news to offer, since it wouldn't take much of a rally to put bulls solidly in charge of HUI's short-term prospects. The accompanying chart shows why: A thrust exceeding the external peak at 179.51 would create a quite promising impulse leg on the hourly chart. That's just 6.52 points above yesterday's high, and so we have something to root for. With any luck, we may be able to get long on the breakout, or possibly on the follow-through rally if it triggers subtly enough.
QQQQ Nasdaq 100 Trust (31.96)
– Posted in: Current Touts Free Rick's PicksI'll offer up a 32.11 rally target, but it's for experts only, since, the way stocks have been moving, this pivot could be chopped liver two seconds after the opening bell. _______ UPDATE The Cubes have been as high as 32.08 in the first hour, subsequently pulling back to as low as 31.41. If you shorted near the high, a break-even stop-loss should be used so that there is no loss even after commissions if you get stopped out. Profit-taking on half the position is also advised at this time.
Silver December Silver (9.160)
– Posted in: Current Touts Free Rick's PicksThe futures will probably need to digest yesterday's sharp move before heading higher. A proper correction would bring them down to at least 9.025, and then it would take a booster-stage thrust of at least 23.5 cents to get the follow-through phase going. Its potential would be to as high as 9.950.
AAPL Apple Inc (100.50)
– Posted in: Current Touts Free Rick's PicksWith a Hidden Pivot target at 121.62, AAPL has high-beta potential if the broad averages continue to rally. Let's try a small speculative play, bidding 0.68 for two November 120 calls (QAAKD). The bid is stingy and may need to be raised, but I'd rather start the day without getting sucker punched. Any adjustments will be published under Intraday Notes, so turn on your Bulletin Launcher if you want to be apprised. _______ UPDATE: Apple took off this morning without deferring to our niggardly bid, and the calls traded no lower than 0.82.
