Monday, February 2, 2009

Calling All Deflationists!

– Posted in: Current Touts

We took on the conventional wisdom of Gary North here yesterday because we are living in unconventional times. This isn’t the Eisenhower era, for sure, and we don’t expect the dire economic troubles that have come to dominate the news, if not yet our individual lives, to simply melt away over time. Not that North’s vision of the futures is all sunshine and lollipops. He has always been a persuasive doom-and-gloomer who has put his money where his mouth is. He ensconced himself in an exurban fortress in preparation for Y2K, equipping it with redundant utility backups that probably could have kept a small town’s lights burning and water running for months. And he is probably still doing immune-system calisthenics to ward off bird flu. (From what we know of this disease, which in China recently started to kill humans rather than birds, we would be the last to disparage North’s seemingly kooky dedication to preparedness.) But on the question of inflation-or-deflation, one or both of which seem all but certain to play out in the years ahead, he is surprisingly non-alarmist. In fact, North is downright skeptical that a serious inflation or deflation lies ahead, even though a debt bubble  aggregating into the hundreds of trillions of dollars is being precipitously unwound. We surmise that his reluctance to view this process with alarm stems from his faith, borne of years in academia, that the Fed is sufficiently in control of the money supply to ward off such extreme events as deflation or hyperinflation. We quite agree that hyperinflation can be avoided, since it would require nothing less than a willful and determined political effort to trigger one off.  Hyperinflations do not occur inadvertently, and to promote one would be tantamount to destroying savers as a class, as well as

QQQQ Nasdaq 100 Trust (29.03)

– Posted in: Current Touts Free Rick's Picks

A Hidden Pivot support at 28.67 looks like an enticing spot to try bottom-fishing this morning. I'd suggest using Feb 29 calls and a 28.59 stop-loss, but I am unable to be more specific at this time because my TradeStation option page has gone buggy and will not refresh. _______ UPDATE: Cancel the order, since our bid narrowly missed catching the opening low, which occurred at 28.75 on a gap. The subsequent, trampoline bounce has carried the Cubes to as high as 29.45 so far.

Best Buy (28.03)

– Posted in: Current Touts Free Rick's Picks

We own two February 30 puts whose adjusted cost basis is 0.60. This figures reflects a partial profit on our position that was realized when we closed out two of the puts for 2.20 as Best Buy fell to our target on Friday. The stock now looks like it will continue to fall to at least 26.82, a Hidden Pivot support. Let's go for extra bases by shorting two February 27 puts if and when the stock touches 26.95 on the way down. The order is good through Tuesday.

GDX Gold Miners ETF (34.41)

– Posted in: Current Touts Free Rick's Picks

We've legged into a covered write that makes us long 200 shares (or a multiple thereof) @31.12 and short two Feb 35 calls @2.55. At expiration this position would yield a profit with the underlying stock trading $29 or higher. Our maximum theoretical return of $1,286 would come with GDX $35 or higher, but it would be reduced by $200 a point below that number. For now, do nothing further.

E-Mini S&P (819.50)

– Posted in: Current Touts Free Rick's Picks

Night owls could try bottom-fishing at 814.75, stop 813.75. The provenance of this target is shown in the chart. My bias at a gut level is mildly bullish, since DaBoyz seem to be having difficulty dragging the futures down to the target. That said, it would take a reversal exceeding 837.75 to turn the hourly chart positive. _______ UPDATE: The pivot evinced no support whatsoever, perhaps because the point 'B' at 833.00 was not a winner. (It had failed to surpass January 25's low at 810.75.) The trading loss would have been about $50.

April Gold (907.70)

– Posted in: Current Touts Free Rick's Picks

Gold is getting whacked Sunday night, down $20 as of 1:30 a.m. On the daily chart, the decline would become significant if the selloff were to dip below 844.70 before exceeding 938.20. The significance of these two prices points is shown in the accompanying chart. More immediately, a penetration of 903.10 would imply more selling ahead, although there could be an intervening rally. If the implied drop that follows that rally reverses at a midpoint support, that would imply the bulls still have control.