February 2009

Gold was bending gently lower Tuesday night, with a worst-case low of 880.20 possible over the next 12 hours. To get there, however, sellers would have to punch through support at 892.20, a midpoint Hidden Pivot that can be bottom-fished with a stop-loss as tight as four ticks. As of 10:49 p.m., there didn't appear to be a place to try bottom-fishing imminently, as may be possible in Silver.

The next pop could take March Silver as high as 13.160, but we should want to see the futures close above 12.650 before we start counting our chickens. Night owls looking to bottom-fish on-the-cheap should consider doing so using the pattern shown in the chart. It has a 12.335 midpoint that is worth three ticks on the stop-loss, and a 12.280 target worth risking the same.

What better proof that Hidden Pivots work than the existence of a trading group that steals and uses them religiously every day? These guys have been doing it for quite a while, but when they denied me access to their discussions recently, it was as though I’d shone a flashlight on a bunch of cockroaches, sending them scuddling into the greasy recesses of denial. Instead of copping to brazen copyright theft – or, heaven forbid, apologizing -- their first instinct was to find out who in the group had ratted them out. (Note to all of you: There are a probably a dozen in your room whom I need only ask politely to find out what the rest of you evidently would break the law to hide.) Ironically, one of them had lectured me about his “Christian value cores” [sic] when I booted him out of my own chat room long ago for a variety of reasons, one of them related to honesty. He apparently needs an Old Testament refresher – specifically, Exodus 20:15: “Thou shalt not steal”. Some of the regulars in this clandestine group have taken the Hidden Pivot seminar that I offer each month -- a six-hour course designed to free graduates from ever having to ask some “expert” what he thinks about the market or a certain stock. The proprietary methods of technical analysis that I teach are not rocket science, as anyone who has taken the course could tell you, but the specific techniques continue to evolve in enlightening and amazingly useful new ways. For instance, I have been emphasizing “camouflaged impulse legs” in the weekly tutorial sessions I hold for seminar grads during market hours every Wednesday. (Click here for a free demo.) Once you get the hang of spotting these subtle tell-tales, you’ll

Midpoint resistance at 1198.50 is all that impedes the futures between here and a Hidden Pivot rally target at 1210.50. Night owls: Entry with the trend could be effortless following a pullback from any minor peak occurring in the range 1199.50-1201.00. The accompanying chart shows, in summary detail, why these two numbers would nicely bracket a "camouflaged" A-B impulse leg of minor degree. _______ UPDATE: At the opening bell, the futures dove (so far) 20 points from an overnight high of 1198.75 -- a tick above the midpoint resistance I'd flagged. I regard the midpoint as having been unshortable, since it occurred in the pandemonium of the opening.

Big Blue has pulled back sharply after peaking just above a key high at 94.67 recorded in early November. This suggests another strong rally lies ahead. With the goal of legging into a calendar spread, let's attempt to do the "buy" side first, bidding 2.15 for two April 100 calls (IBMDT). To come up with a price, I have extrapolated a target from an ABCD pattern in the calls themselves, not the underlying stock. _______ UPDATE: IBM took flight after having gone no lower than 90.16 in the opening minutes of the session. Because the April 100 calls traded no lower than 2.40, our order went unfilled. Cancel it for now.

The futures are taking their sweet old time getting down to an 895 pivot we identified during yesterday's impromptu webinar. In lackluster action, the target has since migrated lower, to 893.60, a Hidden Pivot that you can bottom-fish with a stop-loss as tight as 892.90. If the stop gets hit, infer that a test of last Thursday's low, 875.70, awaits. _______ UPDATE: The stop was hit just before noon, so the 875.70 target is in play. Bulls would regain the upper hand, however, if they can push the futures above 900.70 by day's end.

The Mini-Dow was wafting gently higher Monday evening, presumably bound for a Hidden Pivot at 7987. The target is not recommended as a short because the top of the impulse leg is defined by a "sausage" B that failed to get past the obvious peak to the left of it (see chart). However, from an analytical standpoint, an easy move through 7987 would suggest the beginnings of a short-squeeze that could quickly push the Dow another 70-90 points. _______ UPDATE: The futures rallied, consolidating just above 7987 late in the session, then pushed 76 points higher, as anticipated, before selling off moderately into the close.

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

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.