Monday, December 8, 2008

Given that the futures have not created any positive impulse legs on the daily chart since September, the burden of proof remains with the bulls. They were acting pretty frisky Sunday night, but that augurs nothing special, since Sunday nights often birth whatever flaky ideas have gestated over the weekend. Is Obama's modest plan to create 2.5 million WPA jobs bullish, or bearish for investors? We'll let history judge, but there's nothing to suggest that FDR had much success with this plan the first time around. Regarding the Mini-S&P, it was pussyfooting with a midpoint resistance at 879.50 at press time (i.e., 9:20 p.m), but if it gives way, look for the rally to continue to at least 891.25. That target is not shortable, however, because it coincides with a peak made on the way down last Monday when stocks collapsed. What fascinates most about the hourly chart, however, is the 969.25 target shown. The pattern that produced it looks pretty sexy, and so any two-day close above the target's midpoint sibling, 891.25, should be regarded as a warning of an impending moon shot.

We hold a January 90 call that was purchased for 2.34 last week with IBM plummeting. Let's be a little ambitious, if not quite greedy, by offering a single December 90 call short against it for 1.80, good-till-canceled. If this order fills we'll have legged into a nearly riskless calendar spread that could pay for your subscription. I've included a snapshot of an option calculator that tells why Big Blue would need to reach $88 (or so) by Friday to get our order done. From a Hidden Pivot perspective, IBM looks capable of 88.21 over the near term. However, to get there the stock would first need to move decisively above the target's sibling midpoint, 81.76.

On the 5-minute chart, the March contract had gone about as far as it could go Sunday night, hitting the 9.665 target shown within a single tick. This doesn't necessarily mean the rally is over, and it would in fact be a bullish sign for the near term if the futures were to get second wind, mustering the modest leap it would require to surpass Friday's 9.700 peak. That would open a path up to around 10.150. _______ UPDATE: Silver has easily exceeded our benchmark this morning and now looks bound for at least 11.005 over the near term. Any intervening pullback to the midpoint, 10.070, should be regarded as a buying opportunity -- presumably a tightly stopped one initiated at an abcd midpoint or 'd' target.

The Gold Bugs Index did everything we could have asked of it on Friday and then some. By exceeding the minor Hidden Pivot target shown in the accompanying chart as well as the peak to the left of it, it showed an appetite for munching into the shelf of supply created last week between around 211 and 225. However, it would take nothing less than a surge to 268.07, just above the small peak recorded on October 14, to turn the daily chart bullish. _______ UPDATE: HUI easily ate through the supply on an opening gap of almost 10 percent. Now for the heavy lifting. Upside potential over the next 5-6 days is to as high as 280.42, but first the midpoint resistance at 236.02 will need to be ovecome -- make that, obliterated.

With Sunday's night's modest show of strength, our focus shifts to the bullish pattern shown in the accompanying chart. It is straighforward in demanding that bulls prove their case with a strong close above 808.70, the Hidden Pivot midpoint. Once decisively past this resistance, February Gold would have what looks like an easy shot at 876.20. For now, though, we'll make 808.70 our minimum upside objective. Night owls can use the c-d midpoint of the pattern shown (assuming it develops as indicated) to attempt bottom-fishing.