IBM looks bound for a Hidden Pivot target at 89.04. We can leverage the rally without much risk by legging into a calendar spread at the 90 strike. However, I’d attempt it only if we are able to do the “buy” side at better prices than those that prevailed at yesterday’s close. Accordingly, I’ll recommend bidding 2.34 for a single January 90 call (IBMAR). That’s about what it should sell for if the stock retraces half of yesterday’s thrust before heading higher. _______ UPDATE: We bought a January 90 call (IBMAR) for 2.34. We’ll try to spread it off, shorting a December 90 call on strength, but for now do nothing.
COMMENTARY for Thursday
Rick's Picks for Thursday
A Hidden Pivot at 880.75 is equivalent to the one given as a minimum upside projection today for the Mini-Dow. The relevant point ‘B’ is as phony as the one I’ve countenanced in the YM — but it, too, has those seductive single-bar price points. My Bluefin partners refer to B’s that lack a look-to-the-left peak/low as “sausage B’s” — as in, you don’t want to see how legislation, or sausages, are made.
Watching the E-Mini S&Ps waft higher during yesterday’s tutorial session, we saw a pattern play out to the exact tick. That top was exceeded four hours later following a quite nasty pullback, just as it was exceeded in this vehicle as well, simultaneously. A new target at 8701 beckons magnetically, and it can be leveraged, long or short, as you please. I have reproduced a chart that shows its provenance, and some eagle-eyed pivoteers may notice that the high that I’ve called ‘B’ has failed to take out anything along the wall to the left. I am just a sucker, I guess, for those single-bar A’s, B’s and C’s.
Apple looks bound for 102.60, a Hidden Pivot that we can attempt to short using puts or calls. I’ll post more detailed real-time guidance if and when the stock gets there, so keep your bulletin launcher switched on if you’d like to be apprised. Meanwhile, a pullback to the 94.55 midpoint associated with the target should be viewed as a buying opportunity, catch-as-catch-can.
By day’s end the Indoos had pushed into the no man’s land of Monday’s opening gap, increasing the likelihood that the 700-point selloff will be come to be viewed as mere noise by week’s end. Wake me when 9160 is hit, since, as yesterday’s commentary emphasized, nothing less than that will mean anything, Hidden Pivot-wise. Keep in mind that the rally would have to be uncorrected between 8831 and 9160 to earn our coveted bullish seal of approval. More immediately, the breach of an 8605 rally target (see chart) portends more strength into Thursday morning.
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Take any dozen good reasons for being bearish right now and they still don’t equal the bullishness of the chart shown. The undeniably compelling rally objective is 13085, a 4.8% move from current levels, and one can only surmise that the dusting the 12158 midpoint received on the last pullback (12/28) all but clinched a finishing stroke to the higher number. Moreover, it implies that bears shouldn’t get their hopes too high even if, in the next few days, the Dow plummets 324 points to retest the midpoint support. As of now, that would signal not weakness, but a screaming opportunity to get long. Hard to believe, really, but that’s what the charts say.
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Global Slowdown Saps Even China
by Rick Ackerman on December 4, 2008 6:16 pm GMT
Some years ago, when China began to ramp up its export economy, we predicted here that the country would continue to export aggressively even if global trade fell off a cliff. The result, we wrote, would be historically unprecedented deflation in the manufacturing sector – plummeting prices that would make it all but impossible for even the strongest exporters, including Germany and Japan, to make a profit. China would continue to glut down-and-out consumers with exports because the alternative – sending tens of millions of assembly line workers back to the farm – was unthinkable.
Turns out we were wrong and that the unthinkable is happening. Responding to the worst downturn in international trade since the 1930s, Chinese factories have cut back sharply or shut down, and the workers are being left to fend for themselves. Unfortunately, they do not have the kind of safety net that U.S. workers enjoy — no jobless benefits, no food stamps, no Medicaid, no welfare. Even worse, the farm jobs that they left no longer exist, since much of the land has been leased to agribusiness.
Not that the migrant workers would be much better off if China had not promoted the consolidation of farms in recent years. In fact, there was never enough arable land in the first place to support a large work force, much less make farming pay well enough to bring affluence to the hinterlands. Notes the Wall Street Journal: “China has roughly the same amount of farmable land as the U.S., where only 2% of workers are employed in agriculture. But China has some 730 million rural residents — more than twice the entire American population.” The article was headlined, China Fears Restive Migrants/As Jobs Disappear in Cities. The picture is quite grim, since there is nothing to suggest that exports will not weaken even more before a bottom is reached.
America’s Advantage
In the meantime, tens of millions of Chinese factory and construction workers are about to find themselves adrift. The paychecks they sent home will no longer be there to alleviate the poverty of rural areas. “I don’t have a head for business,” one worker told the Journal. I can only go down the path of a migrant worker. If I can’t be a migrant worker, I don’t have any other ideas.” We Americans are indeed fortunate to live in a country where just about any good idea can attract financial support. We are a nation of entrepreneurs, and that will count for a great deal as we struggle with the same deflationary forces that have begun to sap the vitality, even, of so industrious and energetic an economy as China’s. (If you’d like to have Rick’s commentary delivered free to your e-mail box each day, click here.)