So volatile have the markets become in recent months that the Dow’s fourth-biggest drop in history may warrant barely a yawn if stocks spend the rest of the week recovering, more or less. Some were attributing yesterday’s avalanche to news that November manufacturing activity in the U.S. took its biggest plunge in 26 years. But what will the pundits say if the Indoos gain it all back and perhaps more by week’s end? That investors are waxing “optimistic” about the recession ending now that it has finally been declared? Sooner or later, these guys are going to figure out that the stock market’s ups and downs don’t correlate with events in the real world. Our take is that shares plummeted simply because the short squeeze that drove them to hysteria last week ran out of laughing gas. Not that Helicopter Ben didn’t try his darndest to keep the guffaws coming. The quote of the day from the Fed chairman was that more interest rate cuts are “certainly feasible.” As indeed they are. Actually, if the Fed plays its cards right we could be enjoying monthly rate cuts, five basis points at a time, till the summer of 2010. But would that help pick up the tempo of the economy? Our guess is no, and you don’t need to be an economist to understand why: Consumers simply aren’t in a borrowing mood. They’d probably come around, though, if they were confident home prices were about to soar again. How low would interest rates have to be for that to happen? Bernanke acts like he knows the answer to that question, but in truth, it’s like asking, what would it take to recapitalize Lehmann Brothers or Bear Stearns at $200 per share. (If you’d like to have Rick’s commentary delivered free to your e-mail
Tuesday, December 2, 2008
DJIA Dow Industrial Average (8149)
– Posted in: Current Touts Free Rick's PicksIn case I didn't make it clear enough in yesterday's commentary, let me state for the record that I don't share my colleagues' optimism about a sustained rally from these levels. My friend Tom Tankka cited parallels to the 1930s that imply a powerful bear rally is overdue, but I think economic prospects are more grim right now, and expectations of a recovery far more delusional, than they were following the Great Crash. We had a sound money system then, Americans were not nearly so deeply in hock, and fully 30% of the labor force was engaged in agriculture, literally living off the land. This time around, to make just one telling comparison, 15% of New York City's top earners were living off a financial economy that no longer exists. From a technical standpoint, what you should notice about last week's 1400-point rally is that it didn't surpass even a single prior peak of daily-chart degree. This is not the way powerful bear rallies begin, and although the 7449 low may endure for a while, the Indoos are telling us that they lack the guts to put on a convincing show.
E-Mini S&P (820.25)
– Posted in: Current Touts Free Rick's PicksDaBoyz were uncharacteristically timid Monday night, holding the futures in a relatively tight range near the day's close. The move from Friday's top was bearishly impulsive on the intraday charts, but we'll need to see how the next down-leg plays out before we can make an educated guess about the amount of buying power percolating beneath the surface. If there is plenty of it, the c-d follow-through leg should not even reach its 'p' midpoint, let alone its 'd' target.
February Gold (775.30)
– Posted in: Current Touts Free Rick's PicksSloppy action left no clear downside Hidden Pivots to tout, but if the futures retrace 0.618 of their gains since the November 13 bottom at $700, that would imply more weakness down to at least 751.10. Alternatively, it would take a print today at 786.30 to turn the 30-minute chart (although not the hourly) faintly bullish.
March Silver (9.375)
– Posted in: Current Touts Free Rick's PicksImmediate upside potential is to 9.530, a minor Hidden Pivot, but the futures would have to close above it to hint that they are ready to take on a daunting wellspring of supply just above 10.200. Alternatively, if Silver were about to fall apart it would be signaled by a two-day close below 8.810. Downside potential thereafter would be to as low as 6.855.
QQQQ Nasdaq 100 Trust (27.50)
– Posted in: Current Touts Free Rick's PicksA Fibonacci-based support still beckons at 26.67, 0.20 points beneath yesterday's low. Let's try bottom-fishing with a bid for two December 27 calls (QAVLA), stop 26.59. The calls would be a pretty good buy for around 1.36. This one is for experienced traders only, since the Cubes could gap beneath the target before the session is 30 seconds old. _______ UPDATE: Cancel the bid, since the opportunity has passed. The low this morning was 26.84, or 0.17 from our target, and the calls fell to within a dime of our bid. The fact that the rally began from a low above the Hidden Pivot target is short-term bullish.
