February 2009

The minor trend has turned sharply higher as of 11:30 p.m., driven by who-knows-what. The April contract is trading at 942.30 at the moment, rebounding from an after-hours low at 936.50 where buyers seemed to be congregating. What is most interesting about the rally is that it has exceeded a fairly important peak at 938.20 that was recorded on October 10. That would be mildly encouraging if it had happened during the regular session, but the fact that it has occurred on relatively light volume at night suggests that buyers are confident that others will follow them in at still higher prices. As such, night owls should view any pullback of $2-$4 as a buying opportunity. There are targets galore above these levels, but we'll focus on 952.30 for now. If it is effortlessly busted, JP Morgan and their federally sanctioned ilk had better run for cover.

With Comex Gold trading around $850, we projected a $100 rally to at least $952 in a commentary a while back. Having also promised at that time to don a grass skirt and dance the hula in Times Square in the middle of winter if the forecast didn’t pan out, we breathed a sigh of relief yesterday when the April contract apexed at $949 on a powerful surge of more than $50. (Just a few more points and we’ll have only one more “hula number” to worry about – a $29 target for the shares of Goldman Sachs, currently trading for around $95.) Concerning the $952 target for April Gold, we don’t expect it to be a pushover when it’s finally hit, presumably today or tomorrow. In fact, we’re recommending that day traders attempt to short there with a very tight stop-loss of about 90 cents. (The precise Hidden Pivot target lies at 952.30.) For those not familiar with our technical methods, we use Hidden Pivots not only to trade and to adjust long-term positions, but also to gauge trend strength. How so? In this instance, because the 952.30 target has been so long in coming, we would expect it to contain the rally for at least a day or two. However, if the futures were to push decisively past it by, say, $2 or more within an hour or so of first touching it, we would infer that there is considerable buying power still percolating beneath the surface. At that point we would be confident that a test is imminent of the $1,000 barrier that so far has proven so daunting. Dollar Looks Buoyant If there is a reason to be cautious it comes from the chart of the Dollar Index, which offers no strong evidence that a collapse

The sharp rally of the last two days pushed TBT to a peak at 49.28 -- not quite high enough to get us filled on our put order. However, the pullback looks like it is developing enough thrust to propel TBT above our original target at 49.59. so I'm going to recommend shorting at 50.55, a Hidden Pivot that looks capable of providing some stopping power. We'll use the March 50 put (TBTOX), which should be trading for around 3.00 (see option calculator). The price is just a guess, which is the best we can do with the target still more than $2 away, but we can hone it by observing changes in the reflected Feb 50 put bid as TBT gets within 15 or so cents of the target. Please note that buying put options in this vehicle is equivalent to initiating a long position in the underlying Treasury future. _______ UPDATE: Cancel the order, since TBT appears to have made a short-term top at 49.86.

No change. A Hidden Pivot at 952.30 remains the most significant target immediately above, although getting there has been tedious and tortuous. Looking at a smaller picture yields a lesser target at 945.90 that was mentioned here earlier, as well as its sibling midpoint at 918.10. That last number was a stumbling point yesterday, so a decisive move above it today would be strong evidence that the move is under way to 945.90/952.30.

Having exceeded the 1234.50 midpoint resistance of the pattern shown in the chart, the futures appear bound for at least 1241.00. You can short there with a stop loss just above 1242.00, but this is recommended for nimble night owls only, since a move to the target would create a bullish impulse leg on the lesser charts. _______ UPDATE: Cancel the order, since the futures topped at 1239.75, a hair beneath our target, overnight.

The pattern shown in the chart has the kind of AB impulse leg we should like, slightly exceeding some look-to-the-left lows and using a well defined one-off 'A'. It yields a target at 36.13, so I'll recommend bottom-fishing at 36.14 with an initial stop-loss as tight as 8 cents. Switch to a 15-cent trading stop on a rally to 36.48 and use 36.77 as a minimum upside objective.

Just when it looks like the stock market had permanently lost touch with reality, sellers show up in droves and all is right with the world! Yesterday's bracing plunge refreshed a timeless target at 6883 that we first broached here a while ago. The Hidden Pivot midpoint associated with that number is 7985, and I'd suggest looking on the lesser charts for shorting opportunities if a rally approaches that number. Alternatively, DaBoyz would be back on the offensive if they can foment a short-squeeze today that exceeds 8105.

The market fell hard yesterday, supposedly because details from Treasury Secretary Geithner about the next bank rescue plan were sketchy. In a more rational world, the market would plunge because of the details rather than the lack of them. After all, what could be scarier or more depressing to investors than word that The Government is about to blow another trillion or two in yet another futile attempt to jump-start the banking system? We don’t envy them the task of convincing investors in the U.S. and abroad that the green-and-white confetti held in the vaults of U.S. banks and the Federal Reserve is actually worth something, This is notwithstanding reassurances from Helicopter Ben that 95% of the Fed’s nearly $2 trillion balance sheet is “gold-plated secure.” You can’t make stuff like that up – he actually said “gold-plated secure.” We don’t blame the guy for sounding like a dolt every time he opens his mouth -- it is his job, after all, to pretend that the central bank is in control of the situation even though everyone senses strongly otherwise. Under the circumstances, how could he not look like a fool? Perhaps Bernanke meant “gold-plated” literally? Which is to say, the alleged assets on the Fed’s balance sheet are about as “golden” as a flea-market necklace. Unclogging the System If Bernanke’s latest attempt at spin control laid an egg, there were at least a few brave souls on Wall Street who seem capable of facing up to the problem. “We still have no way to value the assets” clogging up banks’ balance sheets, said Richard Peterson, director of risk strategies at Standard & Poor’s in New York. No argument on that one. However, what Peterson neglected to say was that a market for distressed assets cannot develop as long as

All of the unspent targets broached here in recent days remain valid, although we'd be feeling more confident about the bullish ones if the futures had popped above early October's 938.00 high before going into their current dither. However, it would take merely a print at 907.40 today to put bears back on the defensive, at least for the near-term.