Friday, November 14, 2008

Rally Bloodies Cocksure Bears

By: Rick Ackerman – Posted in: Current Touts

Returning to our desk yesterday after a luncheon meeting in Denver, we dropped in on the Rick’s Picks chat room after-hours to find out what had caused the Dow to trampoline more than 900 points from its intraday low. Alas, the chat room denizens seemed as clueless as we were. We guess it was just one of those things. Not that anyone should have been surprised. Mr. Market has a well-known penchant for making certain that bears do get rich the easy way, betting on so sure a thing as that stock prices will go down, down, down ahead of an unprecedented collapse in U.S. corporate earnings. Lately, the surest thing we could foresee was that the shares of Citigroup, trading above $12 as recently as Monday, were bound lower, to at least $7.75. Accordingly, we put out the following recommendation to subscribers Wednesday night, with the stock trading around 9.64: “Citi is all but guaranteed to hit 7.75 (or 7.09 if any lower), and soon, but as we have learned over and over again in this stock, that doesn't necessarily mean we can make money shorting it. I have no specific strategy to suggest for the opening, since opening-rotation prices rarely favor the retail customer. However, if Citi begins the day with a moderate rally, you might want to have a stink bid in for some December 12.50 puts (CXZ).” As if on cue, Citi gapped 25 cents higher on the opening, presumably on a small excess of buy orders over sell orders. We can only hope that alert subscribers were able to pick a few December 12.50 puts at the bell, since they shot up by 46% before collapsing again as Citi reversed direction and rallied 15% to finish the day at 9.54. We see Citi and the

E-Mini S&P (860.50)

By: Rick Ackerman – Posted in: Current Touts Free Rick's Picks

Yesterday's nearly 100-point rally qualifies as noise, at least so far, because it did not surpass two external peaks of hourly degree (see chart). That could change overnight or Friday morning, but until it happens we needn't act impressed. Looking at a bigger picture, the rally would have to hit 1068 to invalidate the 612.75 target broached here yesterday. _______ UPDATE: During an impromptu webinar Friday afternoon, we got to see the hysterical rally fail in real-time when the S&Ps reversed within 1.50 points of a key midpoint pivot at 916.50. The short-squeeze would likely have continued for at least another 48.50 points if the pivot hadn't but the kibosh on it. However, the subsequent reversal was so nasty that it invalidated the target, 965.00.

Dollar Index (86.44)

By: Rick Ackerman – Posted in: Current Touts Free Rick's Picks

The dollar got hit pretty hard yesterday -- for reasons unknown -- but it caused only minor technical damage to the intraday charts (see inset). We cannot yet say whether the selling is likely to continue, or perhaps accelerate, but if the pullback traces out a pattern like the one in the chart, it may provide us with a way to accurately assess whether a the bull run is over. Specifically, as a sign that the bullish intermediate trend is still intact, we'll be looking for an abc down-pattern to reverse around the midpoint of its c-d leg.

December Silver (9.500)

By: Rick Ackerman – Posted in: Current Touts Free Rick's Picks

To suggest more strength is coming, the rally off yesterday's v-shaped bottom would need to surpass 9.595 today without first pulling back below 9.190. Alternatively, if weakness resumes, a test of the key low at 8.400 recorded on October 28 would appear likely. _______ UPDATE: Silver did what we asked of it Friday, earning the bullish benefit of the doubt for the near term. Our doubts about the longer-term would be assuaged by a print at 11.200, provided the rally to that number had been unpaused on the daily chart after exceeding 9.855.