Although Citi no longer works as a bellwether (or a short) because it has been “saved,” Goldman remains a good mine canary for purposes of detecting whatever vapors are propping up the banking system. While I remain quite confident the stock eventually will fall to my $29 hula number, for the time being, a rally that could carry as high as 94.00 has intruded. If the 77.11 midpoint associated with that target had not already been impaled, I’d be keen to short it. For now, though, we’ll use it analytically, noting whether it may have become support. If so, we could be in for yet more weeks of false spring.

The 969.25 target first broached here an eon ago remains not just valid, but likely. Its associative midpoint lies at 891.25, and that is where, if the opportunity should arise, we might cautiously buy using (ideally) a retracement ‘d’ or midpoint with a tight stop. There’s a secondary target at 931.25, short-able with a 932.25 stop. It looks succulent enough, almost, to offer up as a Pick of the Day.

A quote posted in the chat room was attributed to William Poole, former head of the St. Louis branch of the Federal Reserve: “The Fed is sending a message that it will print money to an unlimited extent until it starts to see the economy expanding.” The person who posted this item noted that Gold did not seem to be discounting a dollar blowout as fearfully as we might have expected. I agree. In any case, based on the technical criteria laid out here last week, we can be fairly certain the dollar short-squeeze begun in July is now as dead as Kelso’s nuts. As you will note in the accompanying chart, the bearish impulse leg on the daily chart has surpassed one internal low and three externals, so far without a retracement. That suggests real power, but it will still take an additional plunge to at least 75.88 to create a bearish impulse leg of weekly-chart degree. We’ll need to see a decent rally on the hourly chart before we start to refine the outlook for the intermediate term, but for now, let it suffice to note that downside targets on the lesser charts have been getting pulped, routinely and effortlessly.

A Hidden Pivot target at 92.31 is equivalent to the 9141 target given for the E-Mini Dow. We’ll try shorting there — albeit with a tight stop, since a decisive move above the pivot would be signaling more upside to as high as 99.12. It’s impossible to estimate how much the January 88 puts (DAVMJ) will be selling for, but we’ll try to buy one if and when the Diamonds reach the target, presumably later in the week. A price of around 2.73 would be a steal, but that’s based on the unlikely scenario of implied volatilities holding level as DIA rises. You should stop yourself out of the trade if the put trades for 0.15 less than you paid for it. I’ve included a snapshot of an option calculator that shows how I arrived at a fair price. The 44 volatility comes from TradeStation. _______ UPDATE: The recommendation was a non-starter, since the Diamonds never made it above 89.80. We’ll consider shorting at another time.