March 2009

Let’s see if a Hidden Pivot resistance at 112.31 can tame this psycho-ward escapee. Despite the violent price action, our position is showing a $90 paper profit at the moment and that could increase to as much as $1900 if the stock is trading around 115 when the April calls expire.  We are short three of them, long two July 115 calls as well, and long two April 85-90 put spreads for 1.20 apiece.  I’ve included a snapshot of an option calculator that shows how I arrived at the $1900 figure.  It has the July 115 calls worth $1497 each on April 18 with GS trading around 115. If you do the math, you’ll be rewarded with an insight into how a calendar spread — slightly ratio’d in this case – works.

Okay, Monday’s commentary was intended as a little tough love for goldbugs. But it doesn’t negate the bullish fact that last Friday’s spike exceeded a look-to-the-left peak  at 964.00 from February 27, engendering a bullish impulse leg that could still bear “C-D fruit”.  To calculate the odds of another leg up, we can use a simple Lindsay calculation.  Assuming 936.00 is not first breached to the downside, the entry trigger for longs would come at 946.50, midpoint resistance at 957.00, and a price objective of 978.00 thereafter. These numbers are offered to help you gauge the strength of any rally, and I am not recommending getting long at 946.50 unless you know how to use “camouflage” to do it. I can offer no useful downside possibilities at the moment, since Monday night’s waft is making a point high ‘C’ elusive.  But once ‘C’ appears to be in, use a 10-minute chart, where A=952.90 and B=936.00. _______ UPDATE (3:55 a.m.):  The fledgling recovery has turned south, creating a ‘C’ high that allows a downside projection to a Hidden Pivot at 927.70 if its midpoint sibling at 936.10 gets trashed.

Today’s forecast isn’t rocket science, since there are only two rally targets to engage our speculative interest.  The first, a Hidden Pivot at 824.00, lies a mere 3.00 points above the apex of yesterday’s joyride; the second is at 855.00.  A move to the higher number should be considered an odds-on bet if the futures close above 824.00 or exceed it by more than 2.50 points intraday. I’ve included a chart that shows how the B-C segment of the pattern I’ve used here is chiseled in granite, there being no credible alternatives. I have not provided any downside targets for today because, frankly, why bother? For the record, though,  a 50% retracement of the joyride would equate to 791.25; a 0.618 retracement, to  784.25

The selloff into last week’s final bell set up a presumably corrective downtrend that projects to 753.25. That’s assuming its midpoint sibling, 762.50, is breached.  (It was, but only by one tick — not seriously enough for us to infer that its supportiveness has been compromised.) We are putting out this analysis before Sunday trading has begun, and it’s possible the futures will head higher rather than lower. If so, and if they do it without first breaching 762.50 decisively, it would then require an upthrust exceeding  780.50 to reinvigorate the short squeeze responsible for driving stocks higher last week. _______ UPDATE (11:45 p.m.):  DaBoyz have applied a rather vicious short squeeze Sunday night, although there is not a headline in sight at the moment that would nominally justify such brazenness.  So that we don’t mistake a good bluff for the real thing, let’s use  a 789.50 print as our benchmark, since that’s what it would take to turn the hourly chart unmistakably bullish. Above 789.50, the futures would have an implied minimum rally target of 809.50, a shortable target, stop 810.25,  given here earlier; or if any higher, 817.00.

The chart shows the derivation of some short-term targets mentioned near the end of today’s commentary. Although Friday’s point ‘B’ low did not surpass a distinctive low to the left of it made the previous day, the pattern itself is sufficiently compelling in its symmetry to warrant our consideration.  Its ‘D’ target lies at 938.50, subject to a possible bounce off  949.00, the midpoint Hidden Pivot.  Based on this chart, the first hint of a decisive bullish reversal that we could identify Sunday night or Monday would come on a print exceeding 960.30. Of course, the implications would be the more bullish if this were to happen without 949.00 being reached first, or certainly 938.50.