The selloff that accompanied tonight’s press conference looked too pat to be taken seriously, so we’ll be looking for stocks to effect a much-less-than-miraculous recovery when trading begins Tuesday morning. On the lesser intraday charts the downtrend was impulsive, but if a minor buying opportubnity awaits, it will likely lie midway along any follow-through down-leg that takes shape overnight. _______ UPDATE: Far from recovering, stocks are acting rationally for once, with the Dow down nearly 300 points in the early going. Is it possible the whack-jobs on Wall Street have actually begun to realize that Obama’s stimulus package will only compound our debt problems, and that having a rookie at the helm, acting like he knows what he’s doing, is hastening the inevitable economic crack-up of America?
From the monthly archives:
February 2009
Let’s try to get in Big Blue’s face this week by shorting a Hidden Pivot resistance at 102.87, the ‘D’ target of the pattern shown in the chart. If you’re interested in this trade keep your Bulletin Launcher turned on, since I’ll diesseminate a price for March 100 put options when appropriate. We should also look for a long- entry opportunity in real time in the chat room, since the target implies more than $6 of upside from these levels.
Our bullish covered write on 200 shares — stock at 31.12 versus Feb 25 calls for 2.55 — will yield a fat theoretical profit with the underlying stock trading $29 or higher. Our maximum theoretical return of $1,286 would come with GDX $35 or higher, a prospect that seems increasingly likely. In fact, the immediate upside target is 40.85, implying a rally of about 12% from these levels. It should be considered well under way if and when the stock closes above 36.43, the midpoint sibling of the 40.85 pivot.
About to enter its 12th day of tedium, gold is quite obviously in no hurry to move up to the next plateau, 945.90, let alone take on the $1000 barrier. The midpoint sibling of that Hidden Pivot is 918.10, as noted here earlier, and we should want to see a close above that number before we infer that bulls are keen to inflict damage on the likes of JP Morgan and other nefarious agents of the Federal Reserve. From a trading perspective, there were two Hidden Pivot supports available on Friday where one could attempt bottom-fishing with tight stops: 909.20 and 901.00. However, both may have been pulverized by the time you read this if Sunday’s opening is lacking in delicacy. _______ UPDATE: The second of the two pivots given above, 901.20, would have worked nicely for bottom-fishers, even those using a stop-loss as tight as three ticks, since the futures managed an $8 bounce from 901.20. It was short-lived, however, and the April contract had relapsed to as low as 895.00 in the early going on Monday. The nearest logical support was 890.30, equal to a key intraday low recorded a wek ago.
With this sub-par short-squeeze about to enter its third day, a Hidden Pivot resistance at 882.75 is about as high as we should expect over the near term. The provenance of this target is shown in the accompanying chart. It looks almost too pretty to short, though, given the picture-perfect symmetery of the pattern that produced it. However, from an analytical standpoint, an easy move through the resistance would hint of more carnage to come for bears who may have placed themselves in harm’s way. The futures looked set to pop above a key high at 876.00 recorded on January 28, but until that happens, pivoteers can use the 15-minute chart to find leverage-able abc patterns with impulse legs subtle enough to yield low-risk entry opportunities.
I’m in San Francisco for the weekend, visiting family and friends. Everywhere you go, people want to talk about the economy. The San Francisco Chronicle led yesterday with a story about how all of the city departments apparently are eager to swoop down on the city transit system to glom some cash. The Muni is evidently the only public facility that’s making money – or at least, taking in relatively large sums of it each day – and it is therefore perceived as a possible lifeline by other departments starved for cash, including the police and fire departments. A friend of mine who works as a librarian in the main facility says that funds earmarked for her department are similarly in jeopardy of expropriation because the library, while not in budgetary surplus, enjoys sufficient private funding to have at least stayed solvent until now.
It’s hard to believe that the Muni, for all its squalor and seediness, would be looked on as a cash cow. San Francisco itself is looking pretty run down — not so much in the tourist areas, but the neighborhoods. The grassy median of Geary Boulevard, a major east-west artery that stretches from downtown to the ocean, is strewn with trash, and the asphalt is full of cracks and potholes. The locals must be wondering how the streets could have fallen into such disrepair, even as the fees and fines the city collects from motorists have ratcheted into the stratosphere. Where did all of that money go? » Read the full article
Here’s a roundup of this week’s commentary:
Obama’s Honeymoon Officially Over
Hard to believe Obama is already knee-deep in ethical muck. Even Maureen Dowd has gone on the attack, albeit with 28-ounce gloves: “Obama [was telling schoolchildren] his favorite superheroes were Batman and Spiderman,” the New York Times’ third-ranking Bush-hater wrote on Thursday, but “his own dream of being the superhero who swoops in to swiftly save America was going SPLAT.” Is the honeymoon already over, the huge Inaugural throng on the D.C. mall just a faded memory?
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Bank Shares Just Lotto Tickets
We searched in vain for news that might have explained why Bank of America shares collapsed 15% from their highs yesterday. After a head-fake on the opening, the stock fell 67 cents to 4.68, bringing it that much closer to the vanishing point. We are predicting BAC will fall even lower in the days ahead, to at least 3.93. That would represent a decline of 90% since the stock was added to the Dow Industrial Average a year ago. As B of A was plummeting, the shares of another former banking star, Goldman Sachs, were soaring, rising more than $7 at one point during the session. GS settled at 87.50, up 4.69 and miles from the $29 target we have predicted for it. (A hula number, by the way. We have pledged to don a grass skirt and dance the hula in Times Square in the middle of winter if the stock does not eventually collapse to the target within the next year or two.)
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Hidden Pivots Worth Stealing
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”.
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Calling All Deflationists!
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.)
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Killer Deflation Eludes Monetarist North
In the Inflation vs. Deflation debate, Gary North has come up with this grabber-of-a- headline: “If Deflation Is Coming, Sell Your Gold,” he writes at LewRockwell.com. If North is trying to scare deflationists into abandoning their arguments, giving banner play to such bad advice should only make them snicker and hoot. For in fact, deflation is already here in spades, in the form of a financial implosion that has wiped at least $80 trillion dollars worth of “wealth” from the world’s books. And in the midst of this, of course, gold has performed superbly for investors.
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Most of yesterday’s short squeeze occurred over about 30 minutes of the six-hour day. However, what we should notice is that at the end of the day, all of the buying had failed to exceed Wednesday’s high. That doesn’t mean it couldn’t happen today — only that there was no real guts behind the push. If the squeeze is to turn more menacing, though, we should see the futures push above 844.50 early today and then find support there. That would allow a consolidation for a thrust, presumably, to the 882.75 target associated with the 844.50 Hidden Pivot midpoint. Night owls can try bottom-fishing at 833.50, although the rally could conceivably come from the 839.50 midpoint associated with that number, a minor-trend ‘D’ target. _______ UPDATE: A little more than halfway into Friday’s Follies, we have have seen one of the stronger short-squeezes in recent weeks. However, since the overnight low occurred three points above our bid, we were spectators when the futures took flight.
The futures exceeded the 12.890 Hidden Pivot resistance shown in the chart by three cents, hinting of more upside to come. If so, the 13.160 target broached here earlier should be hit today, and perhaps exceeded. There is no technical logic to indicate a precise impediment above 13.160, but a test of the $14 barrier would seems likely thereupon.
Press Conference Was a Breeze
by Rick Ackerman on February 9, 2009 10:16 pm GMT · 12 comments
Traders have given President Obama’s first press conference a tepid response, although the selling Monday night looked more like a shakedown by clever buyers than an attempt to discount bad news. The E-Mini Dow futures were off as much as 100 points as the President spoke – although not, we would surmise, because he surprised or disappointed anyone. In fact, most of the questions, even the one asked by the AP’s battle axe, Helen Thomas, were pretty tame. Amidst the worst economic crisis since the Great Depression, Obama found time to address Alex Rodriquez’s apparent use of steroids. While there is no question that this continues to be a serious issue for Major League Baseball, in the context of the catastrophic economic news that has dominated the headlines, A-Rod’s confession could probably qualify as comic relief — or just plain relief, if you’re Barry Bonds.
We’re not sure we’re ready yet to ascribe the trait of arrogance to the new President merely because he has been insinuating that anyone who opposes his economic stimulus package is practically an enemy of the state. If so, then Lew Rockwell would qualify as Benedict Arnold. At his web site, Rockwell was comparing Obama to Bush, post 9/11, asserting that the ex-President had come to the office feeling that he was entitled to start a war. Similarly, says Rockwell, Obama has been acting as though he thinks he’s entitled to a blank check for a trillion dollars, the better to launch his own version of FDR’s New Deal.
For his part, Obama denies that he envisioned spending his first weeks in office pushing a massive spending bill through Congress. Whatever he envisioned, he seems absolutely certain that more government, and vastly more spending, is the only way to address the problem. Politically speaking, he may be right, since no U.S. president could afford to be perceived as doing little or nothing with the economy locked in a death spiral. But we wonder how many voters share our skepticism that it will work. It is reasonable to ask whether stimulating more borrowing can possibly be the cure for a credit collapse. On this question, we are grateful for the fact that the Republicans are not simply rolling over.
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