Our recent commentary, "Calling All Inflationists!" touched off quite an e-mail firestorm. Unwavering deflationists ourselves since the 1990s, we'd challenged readers to explain exactly how inflation might emerge amidst the devastating asset collapse now occurring throughout the world. Your answers were not merely enlightening, but compelling. Of course, it's hard to argue with the contention that the dollar is just a worthless scrap of paper, and that, sooner or later, that fact is going to hit home. When it does, perhaps because of some epic train wreck on Wall Street, grocery store shelves will be stripped bare within hours. Food, fuel and other essentials will become scarce overnight, and those who possess such things in salable quantities might not be willing to trade them even for hundred dollar bills.Hyperinflation will come on like a tsunami at that point, but the question for now is: How much more deflation will we have to endure first, before debt is repudiated by a tidal wave of printing press money? Jim Sinclair, an unapologetic hyperinflationist who commands the respect of a large readership, thinks the money blowout could start as early as 2009. Possibly, but we suspect it will take longer, since the fiscal stimulus about to be tried by our new President will put us on the slow track relative to straight monetization. Those who have been hoarding gold needn't worry quite as much about such things, since, unless the Government confiscates bullion as it did under Roosevelt's 1933 edict, there is no easy logic to support a bearish case for gold. As we've noted here before, even if deflation is about to cause gold's price to drop by 50% in the next year or two, all other types of investable assets will probably fall by even more. So far, though, nothing so
Wednesday, January 21, 2009
NQ Mini-Nasdaq (1151.25)
– Posted in: Current Touts Free Rick's PicksThe weekly chart makes clear that the futures will fall to at least 1102.00 in search of traction. Since that number comes from a long-term chart, we cannot expect to get away with the usual penny-ante stop-loss if bottom-fishing. Better to attempt it at a nearby target of a lesser pattern. In this case, the relevant support comes in at 1104.50, a Hidden Pivot whose provenance is shown in the accompanying chart. _______ UPDATE: We'll set aside the bearish target for now, since the futures are in rally mode.
Dollar Index (85.75)
– Posted in: Current Touts Free Rick's PicksThe Dollar Index has speared a midpoint resistance at 83.98 on the weekly chart, and although this is bullish for the near-term (i.e., the next 2-3 weeks), I'd need to see a two-bar close above the pivot to infer that DXY is capable of taking on some important peaks above 92 that were recorded in mid-2004 and in late 2005. The 'D' target associated with 83.98 is 90.62, implying a rally of about 8 percent if the lower number is decisively exceeded.
February Gold (851.20)
– Posted in: Current Touts Free Rick's PicksA false breakdown beneath yesterday's 847.50 low has a good chance of finding support at 847.10, a midpoint pivot, but the pivot looks too close to the visually obvious low to be considered a safe bet. A more conservative play would be to bottom-fish at 841.50, the 'D' sibling of 847.10. That's my maximum downside projection for the near term, but if it's exceeded, take it as a sign that gold is in no great hurry to test resistance near 900.
E-Mini Dow (8008)
– Posted in: Current Touts Free Rick's PicksWith no oomph behind Monday night's short squeeze, we never even came close to shorting 8272. The rally died in the wee hours at 8221; then the futures began their nasty, 350-point slide. They were wafting blithely higher again Tuessday night, but we shouldn't read too much into it. A print at 8464 would change all that, creating a bullish impulse leg on the larger intraday charts (i.e., the 240-min), but anything less would be just noise.
E-Mini S&P (813.00)
– Posted in: Current Touts Free Rick's PicksThe 809.00 midpoint support of the pattern shown is not chopped liver, so we should infer that the E-Mini S&Ps are fighting for their miserably corrupt life here. If they lose the struggle, closing below 809.00 for two consecutive days, or trading well below it intraday, that would put the midpoint's 'D' sibling, 675.50, in play. That implies a thousand-point drop in the Dow, which should surpise no one tuned into the economic news these days.
