At what point does a recession become a depression? Our colleague Bob Bronson of Bronson Capital Markets Research notes that there doesn’t appear to be a hard set of rules to help answer this question. “As far as we know there is no theoretic or empirically defined gradient for quantifying the full range of economic declines from recession to depression,” Bronson notes in a recent e-mail. “Please advise if you have information otherwise.” Anecdotally, a recession supposedly is signaled when your neighbor loses his job, a depression when you lose yours. There is a painful truth in this, since the economy, bad as it is, undoubtedly looks much worse right now to someone who has been unemployed for a few months. But when we consider the big picture, unemployment is nowhere near the levels of the 1930s. In fact, by 1933 slightly less than 27% of all wage earners - about 15 million workers - had been fired or laid off. Could things get that bad this time around? It seems doubtful, since so many workers have relatively secure jobs in local, state and federal government. But we see under-employment becoming a much bigger economic problem than it was during the 1930s. While even in the worst of times the vast majority of workers may be able to avoid filing for unemployment benefits, their incomes could nonetheless fall to subsistence levels. Beating the Draw Indeed, many, if not most, of the country’s top earners are unlikely to show up statistically as unemployed, even if they are down-and-out. In New York City, for instance, a complete economic collapse looms because such high-wage categories as investment banker, stockbroker and, soon, realtor, have crashed and burned. But we’d be surprised if even a small fraction of those whose incomes went to zero after
Friday, December 19, 2008
DJIA Dow Industrial Average (8605)
– Posted in: Current Touts Free Rick's PicksThe Dow is trading exactly where it was two months ago, almost too tedious to watch. That of course means we should expect a "surprise" at any time, presumably one that holds rewards for neither bulls nor bears. The accompanying chart shows why it would not take much of a rally to create a powerful impulse leg on the daily chart. However, although this has been the case for more than a month, bulls have repeatedly failed to seize the opportunity. We'll use a downside Hidden Pivot at 7923 as our minimum objective for now, subject to negation by a thrust exceeding 9654.
February Gold (834.70)
– Posted in: Current Touts Free Rick's PicksIn thin trading Thursday night, the February contract made a tentative stab below a minor midpoint support at 846.50, hinting of more downside over the near term to as low as 831.60. That's a Hidden Pivot support, and it looks like a decent spot to attempt bottom-fishing if the midpoint has gotten crushed overnight. (The opportunity to bottom-fish the midpoint itself is already stale. It could have been be done with an initial stop-loss as tight as 845.90.) You'll be on your own if you get long, but don't hesitate to take a partial profit, at least, on a bounce of as little as $2.50-$3.00. If the midpoint holds, the rally would become doubly credible on a print at 866.00._______ UPDATE: You could have gotten long within $1.00 of the low, since Gold plummeted overnight to 830.10 before rebounding to as high as 842.70. My apologies for the error in my original instructions -- a seemingly unavoidable byproduct of too many 14-hour workdays.
March Silver (10.960)
– Posted in: Current Touts Free Rick's PicksMarch Silver looks bound for a minimum 10.680, but the provenance of this Hidden Pivot support looks a bit too vague to make it ideal for bottom-fishing. Alternatively, to effect a turnaround, the futures would need to push above 11.210, preferably in the early going.
February Crude (42.28)
– Posted in: Current Touts Free Rick's PicksA bearish target at 38.33 is equivalent to the 34.57 target given here earlier for the Janaury contract. The midpoint associated with the target lies at 45.58, and it is no coincidence that yesterday's little head-fake died just six cents above it. Also, the fact that the midpoint figured so closely in the day's price action suggests that the target itself, 38.33, will produce a relatively precise bounce. I typically advise stop-losses of at least 22 cents in this vehicle when playing for a reversal at a Hidden Pivot, but in this instance you could probably get away with a stop as tight as 12-14 cents.
