[My apologies, for, amidst Halloween doorbell mayhem, I forgot to include the source of today’s commentary when I copied-and-pasted the article into my text editor. The essay comes from my good friend Chuck Cohen and is reprinted with his kind permission. He wrote it originally for publication at LeMetropole. The chart is my own and replaces the one Chuck had included.] Each day more and more bottom-callers throw their hats into the ring. They include almost all of the famed prognosticators plus many of the unknown ones who are hoping to make their reputation by calling the conclusion of this painful market. Most of their optimism is based upon the nearly 50% decline in the market over the past year, plus the sense that stocks are now fairly valued based upon normal market conditions. But the problem is, these are not normal times. There is also a gnawing sense that certain technical prerequisites that have preceded other bottoms during the past few years are lacking. I want to focus on one that we should see when the market is really ready to rally: downward gaps on bad news. If you can go back to the few times that the market has rallied significantly -- in June and July of 2006, in February 2007, and in August 2007 -- the drops that preceded the rallies served to flush out all the bears. Most of the time, the washouts took place on bad news and, very often, on Fridays. But strangely, this time most of the panics, except for the 500-pointer a few weeks ago, occurred not on the sell side, but on heavy buying. Where’s the Fear? Think about it. The market has dropped almost 6,000 points, and yet the players have not been fearfully dumping stocks, but buying them out of fear they'll
Saturday, November 1, 2008
December Gold (722.70)
– Posted in: Current Touts Free Rick's PicksA sequence of three midpoint supports can tell us how determined sellers are: 716.30, 712.90 and 710.30. As always, a penetration of one, even if by only a few ticks, would make a fall to the next likely. Alternatively, the leastmost rally required to turn the (very) lesser charts bullish would require a print at 744.40. Nightowls can try bottom-fishing at any of the Hidden Pivots given above, but I'd recommend risking no more than four ticks on the initial stop-loss._______ UPDATE: The futures bottomed at 717.80, just 80 cents from the first target, but the bounce so far, to 727.40, fell a tad shy of creating the bullish impulse league we'd need to see before inferring that a minor-trend reversal has occurred. Cancel all bids ahead of the weekend.
December Silver (9.830)
– Posted in: Current Touts Free Rick's PicksRisk:reward for bottom-fishing will be best at 8.825, a 'D' target likely to be kissed if its associative midpoint, 9.365, is breached by more than a few ticks. Keep in mind that a reversal from either number, especially the first, could be the beginning of a rally with as much as $2.13 of potential (or as little as $1.06). _______ UPDATE: The futures dipped no lower than 9.200, negating our buying strategy. The reversal has the potential to hit 11.330, but bulls will first need to get past 10.265, the midpoint Hidden Piovt resistance associated with the target.
QQQQ Nasdaq 100 Trust (32.81)
– Posted in: Current Touts Free Rick's PicksWe backed away from a Nov 32 put bid yesterday when stocks seemed reluctant to surrender the suspicious gains they'd achieved on a short-squeeze in the opening minutes. However, I wouldn't mind being short going into the weekend if QQQQ goes nuts today, closing at some absurd high. That rules out a middling target at 33.65, but not one at 35.40 that is shown in the chart. If the Cubes get within a dime of it, buy four December 33 puts (QAVXG). You can pay the offer this time, since spreads in this vehicle tend to be pretty tight. The puts would be a pretty good deal for 1.60, and so you could leave a limit order at that price with your broker. That price assumes implied volatilities will remain more or less constant throughout the rally; in practice, premium levels are likely to fatten.
E-Mini S&P (973.50)
– Posted in: Current Touts Free Rick's PicksThe futures were drifting lower at 2:50 a.m. EDT, but as long as they haven't breached 926.75 overnight, a Hidden Pivot at 982.50 can be shorted with a stop-loss as tight as three ticks or as loose as 1.75 points. The number is the sibling of a 'D' target at 1046.25 that would become an odds-on bet if 982.50 is exceeded by more than 2.00 points. I am quite confident in both of these numbers because the pattern that produced them is so obscure. Incidentally, an ES rally to 1046.25 would put the Dow very near the 9955 target we've been using as a maximum upside projection for the near term. This being a Friday, no scenario, no matter how crazy, should be ruled out. Pivoteers can find the ES pattern on the 30-minute chart, where A=843.50 (10/28) and B=971.25. (And yes, I know B and C occur on the same bar, but sometimes you have to break the rules.) _______ UPDATE: Today's strong rally topped two points shy of our short offer. Cancel it, since the Hidden Pivot target at 982.50 now has "competition" from the visually obvious peak that has formed at 980.50. Let's also stipulate that the futures close above 982.50 for two consecutive days before we infer that something genuinely interesting may be happening.
