January 2009

The Hidden Pivot target at 12.585 first broached here a while back is still my minimum upside target, but if the futures close above it or trade more than 3 cents above it intraday, expect the rally to continue to at least 12.955 over the near term. At 1:15 a.m., there didn't appear to be any good handholds for night owls, but if you're looking for one, I'd suggest waiting for a subtly bullish impulse on the 5-minute chart.

The futures did not quite make it down to the 866.40 target before they exploded yesterday, hinting that this rally is not likely to die with a whimper. The April contract was sticking and jabbing a 908.30 resistance shortly after 1 a.m., seemingly reluctant to break above it without some help from the news. If it comes, the next hidden resistance we might use to gauge the resolve of buyers lies at 912.20. _______ UPDATE: It's 3:37 a.m. and gold is rampaging. There's a minor Hidden Pivot at 936.00 that we can use as a minimum upside target for the moment, but keep in mind the 952.30 hula number, which looks like it will be hit sooner than we might have anticipated. I don't expect it to be breached easily, but if the futures blow past it within an hour or two of first touching it, we can infer they are eager to take on $1000.

Around 1:00 a.m., the futures had wafted up to 848.00, just a tad shy of an 849.25 Hidden Pivot target. A two-tick penetration would imply more upside, presumably to test the mettle of an 850.50 peak made on the way down Thursday. However, it would take at least 854.00 to hint that DaBoyz have something more ambitious in mind in the way of a traditional Friday short-squeeze.

Because several subscribers reported buying February 30 puts (BBYNF) near Wednesday's lows, I'll establish a tracking position for your further guidance that assumes four puts acquired for 1.40. Since the stock looks bound lower to at least 28.55, let's plan on closing out two of the puts at-the-market if and when 28.63 is touched. A price of about 2.30-2.40 for the puts would be about right. In addition, because a turn-up could also come at 28.77, scalpers can bid 28.79 for 200 shares, stop 28.71. If the order fills, offer the stock at 29.18 o-c-o with the stock. _______ UPDATE: Even with option volatility crashing as BBY fell, we managed an exit for 2.20, giving us a cost basis of 0.60 for each of the two puts (or multiple therof) that remain. As of 10:36, Best Buy had slightly exceeded our target, suggesting still lower prices ahead. Incidentally, the stock scalp could have produced a small profit, since BBY bounced from 28.76 to 28.90 on the way down.

After buying three cents off this morning's trampoline low, we took some profits and now hold 200 shares with an adjusted cost basis of 31.12. The rally has the potential to reach 38.06 over the next 3-4 days, subject to midpoint-pivot resistance at 35.03. Accordingly, I'll recommend putting on a covered write by shorting two February 35 calls (GBJBI) if and when the stock touches 34.95. A tad less than $2 would be about right for the calls at that point. _______ UPDATE: With Comex Gold surging at 4 a.m., there's a chance that GDX could open on a gap. If so, to guide you in turning our stock position into a covered write, I have supplied theoretical values for the February 35 call with the stock trading anywhere between 34.40 and 36.50. Keep in mind that if you are able to short the calls for $3 or more, it will produce a theoretical profit at expiration that is nearly equal to what you would make if the stock were to reach the 38.06 best-case target. However, if Gold futures are up $10 or more at the opening, it should be easy to reap at least $2 for the calls. ________ FURTHER UPDATE: With call options incredibly pumped on the gap-up opening to 35.54, we did our covered write at the best price of the day, 2.55. This will give our position excellent downside protection and, at expiration, an effective sale price of 37.55 on the stock if it's trading $35 or higher. That's equivalent to a profit of $1280 for a relatively small position -- one on which we only risked $20 theoretical to begin with. Do nothing further for now, although we may adjust by covering, and then re-shorting, the calls at some point.

We weren’t trying to be unkind when we wrote here yesterday that Obama’s $825 billion stimulus plan didn’t have a prayer of succeeding. We wish our new President all possible success, really, but our good feelings stop short of believing that he can cure a credit bust with galactic new quantities of public borrowing. Yeah, right, Keynes said it could be done. But with all the critical scrutiny that Keynes’ misconceived ideas have been attracting lately, even neo-Fabian hacks like Paul Krugman may eventually be forced to concede that fiscal stimulus failed miserably in its goal of lifting the U.S. from the economic mire of the 1930s. Another crackpot notion about that era that long ago wilted under the light of truth is that the Fed turned the 1929 Crash into a Depression by tightening credit. The statistical record says the opposite is true – that the Fed eased frantically, to no avail.       The only popular theory about the causes of the crash that still holds up is that the Smoot-Hawley tariff was the straw that broke the camel’s back. For sure. But is the lesson still so pungent that a Democratic Congress will champion free trade, as it absolutely must? We shall see. But one is hardly reassured by the Cyclopean dimensions of Obama’s stimulus sausage. In purely economic terms, the effort is doomed simply because it will borrow vast sums of capital for purposes that cannot possibly improve the economy other than very superficially.   Just how superficially beggars belief. We had initially taken Obama at his word, that there was plenty of stimulus in this bill for business and capital investment. In fact, to describe this mephitic heap of political rejectamenta as a legislative sausage is to slander the meat-packing industry. The stimulus is

As long as Newmont is getting undeservedly trashed, let's attempt some bargain hunting if the selling intensifies. The nearest Hidden Pivot worth bottom-fishing lies at 36.40, so I'll recommend bidding 36.44 for 200 shares, good through Friday. _______ UPDATE: Continue to bid for stock. Newmont got hit hard on the opening bar, but the fake-out low at 37.02 -- quickly recovered -- was not sufficiently overdone to get our order filled.

The futures turned vicious after exceeding by a couple of points an 873.75 target that had served us well this week. Night owls can attempt bottom-fishing nonetheless, since there's an enticing midpoint support at 866.25 associated with the pattern shown in the chart. This one warrants a stop-loss no wider than 2-3 ticks, but if it's hit expect the downtrend to continue to 857.75. _______ UPDATE (1:23 a.m.): The futures have bounced slightly from a so-far low at 865.25. I'll treat the order as having filled and survived, since some of you may wisely have second-guessed my extremely tight stop-loss. Assuming, now, an 864.75 stop, you should be shooting for at least 871.00 before you implement a trailing stop or take a partial profit on a multilot position. Actual potential, short-term, would be 876.00, a Hidden Pivot resistance. _______ FURTHER UDPATE: In their last-gasp rally of the night the futures made it no higher than 869.00, triggering our stop, and a loss of about $75, on the way down. Weakness spilled over into the opening, sending the futures to a so-far low of 850.50. This was impulsive on the hourly chart, and so we should expct more weakness.

A Hidden Pivot support at 867.20 is currently my worst-case target for the correction begun Monday from $918. You can try bottom-fishing there with a stop-loss as tight as 866.40. Alternatively, a thrust today that touches 899.70 would signal a reversal and no more pain for a while. Please note that the big-picture target at 952.30 given here earlier will remain valid as long 803.60 is not exceeded to the downside.