Wednesday, February 25, 2009

Helicopter Ben’s Assurances Ring Hollow

– Posted in: Current Touts

So, Helicopter Ben believes he’s got inflation under control. That’s like Nagasaki’s public health director saying two days after the bomb that he’s got strep throat under control. The Fed chairman also said he didn’t see a need to nationalize the banks. That would the mayor of Nagasaki speaking, saying he saw no reason for Japan to surrender. Duly noted – and stay calm, folks. But in either case, the events of the day have pre-empted anything the Fed might have been planning. There was never a possibility of “controlling” inflation because deflation has gone rampant around the world, laying waste to nearly all asset classes except bullion, and, for the moment, Treasury paper and dollars. Concerning the nationalization of the banks, some would say that we have not avoided it, we have only avoided calling it by its correct name. Whatever we decide to call it, the de facto nationalization of the U.S. financial system, including insurers, has left bank assets in a state of limbo, there to remain until The Government decides what it really wants to do. In the meantime, presumably until Congress establishes a Civil Service pay grade for sitting on the boards of Citicorp et al., we’ll have to go along with the pretense of our political leaders that the banks are still independent. Markets Will Prevail In his second day of testimony yesterday before the House Financial Service Committee, Mr. Bernanke asserted that the Fed has tools it can use to prevent the huge increase in the money supply from eventually spawning inflation. One such tool is the Fed’s ability to pay interest on reserves. But if bringing those rates down to the vanishing point has not succeeded in getting banks to expand their lending so far, how can the Fed expect to exert

GDX Gold Miners ETF (33.45)

– Posted in: Current Touts Free Rick's Picks

Yesterday's avalanche buried hopes of reaching a 40.85 target any time soon. Let's go over to the Dark Side, bidding 1.40 for two June 25 puts (GBJRY) on the opening. Thereafter, if the order has gone unfilled, lower the bid to 1.30 and add two more puts, day order. _______ UPDATE: We bought two June 25 puts on the opening for 1.40. For the remainder of the day, bid 1.30 for four more.

GS Goldman Sachs Group (92.89)

– Posted in: Current Touts Free Rick's Picks

Goldman's short-squeeze should have convinced no one that happy days are here again for the banking industry, but even so, a 16% rally in one day should temper our enthusiasm for resisting the tide. Clearly, the best way to short the stock is to reverse a long position at a rally target. There's one now at 103.92, so we may have an opportunity to do just that. More immediately, though, the stock looked bound for a lesser target at 94.81, predicated on a decisive move past its associative midpoint, 93.07.

E-Mini S&P (765.75)

– Posted in: Current Touts Free Rick's Picks

Just a little bit more coaxing and night owls will have a dandy opportunity to get long with a stop-loss as tight as 1.00 point. The Hidden Pivot where I am suggesting you try bottom-fishing lies at 765.75, and its provenance is shown in the chart. The futures are currently trading 768.75 and would likely abort the downtrend if they get past 769.50 on this run. However, the 765.75 target will remain viable in theory unless 772.25 (i.e., point 'C') is exceeded. _______ UPDATE: The 765.75 target proved too delicate for the 10-point swells that roiled this vehicle overnight. Traders who followed my advice would have been stopped out for a loss of $50 or so.

April Gold (945.70)

– Posted in: Current Touts Free Rick's Picks

The pullback begun last Friday from 1007 would warrant our mild concern if it hits 890.20 within the next 3-4 days. Moreover, if the move were to occur without an intervening correction lasting more than a day, it would create a bearish impulse leg on the daily chart. This morning, bulls will have their hands full trying to turn things around, since it will take nothing less than a print at 988.10 to turn the lesser intraday charts positive. Night owls could try bottom-fishing at 958.50, stop 957.90. _______ UPDATE: The futures dipped down to 952.20 overnight, so anyone who attempted to bottom-fish at 958.50 would have been stopped out near 957.90 for a loss of about $60-$80. _______ FURTHER UPDATE: Gold relapsed after a promising rally that began the day. As of 3:30 p.m., the downtrend had gone as low as 945.20. However, more selling to at least 934.90, a Hidden Pivot, appears likely. Scalpers can try bottom-fishing there with a tight stop-loss.