After playing footsies with our rally targets for the last two days the futures caught a short-squeeze gust in the final minutes of yesterday’s session, stealing a few more points to create a 777.00 high. This created an impulse leg on the hourly chart that is subtle (see chart) but which should be understood by bears as a shot across the bow. Thefact that it happened on a Tuesday raises the prospect that the week could be especially memorable for anyone still short the averages at this point.
From the monthly archives:
March 2009
In thin trading Tuesday night, by breaching the 913.90 Hidden Pivot midpoint of the pattern shown in the chart, the April contract has tripped a signal implying a fall to 886.70 is imminent. A bounce from near 907.20 is likely in any case, and if that bounce were to surpass at least two prior peaks on the 15-minute chart, we’d give bulls the temporary benefit of the doubt. However, the rally would need to touch 927.60 today to decisively reverse the now three-day slide.
A 6.00 bid for two July 115-April 115 call spreads would have come all to easily the other day, so I’ll track and record the position for your further guidance. We were sleazed out of the further short sale of an additional April 115 call yesterday for 2.60, since someone stepped in front of us with an offer at 2.56, the high price of the day. No matter; we’ll try again, greedily raising the price to 3.80. If successful, we will have legged into a bullish ratio calendar-spread that will produce a profit over a very wide price range when the April calls expire. How wide? You can
Reports that Atlantic City’s casino’s are in serious trouble don’t tell the half of it, according to our source. He reports as follows:
“It’s really a lot worse then the news stories would suggest. I have upper management contacts inside a few halls, and they’ve told me the published numbers are really the best face they could muster. In reality, Atlantic City is toast if this continues much longer. The Recession is keeping people near home in Pennsylvania, and with new slot-shops opening nearby, they won’t be back. Atlantic City fumbled the ball badly. I blame the state and city government for allowing a few big operators to destroy the rest of the town. Now they’re talking about how they need main street attractions to bring back the tourists, but most everyone closed or sold their family businesses and left long ago. Why would anyone come to this town ? It looks worse then it did in the 70’s — nothing but massage parlors, gold shops and cheap ethnic restaurants ( it looks like Tijuana in the 1960s ). And to top it all off, you can’t even see the ocean from the Boardwalk anymore. They might as well have built everything back on the marshes.”
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The multiyear high achieved two weeks ago came within 0.64 points of a rally target more than five months in coming, so we should be alert to the possibility that an important top is in. The pullback has already generated several bearish impulse legs on the hourly chart and a couple of patterns that have reached their ‘d’ targets. However, it would take merely a further decline to 85.62 to achieve this on the daily chart.
I’ve been beating the drums for a push up to 112, but Goldman (GS) flunked the strength test yesterday — miserably — when it failed by a relatively small amount to surpass a look-to-the-left peak at 102.71 recorded last October. If the rally had had any guts, the extra $1.32 shouldn’t have been a problem. Instead, the stock head-faked sharply higher in the early going, only to die at 101.41 and retreat at a kamikaze pitch. The subsequent air pocket amounted to $7, a comeuppance that is likely to put bulls on the defensive for at least the next 2-3 days. Based on the chat-room discussion, I can’t tell whether any subscribers put on the calendar spread. If so, let me know in the chat room, along with the price, so that I can establish a tracking position. Check back for an update, since we may cut our losses if Goldman looks punk. In the meantime, for each two spreads, offer an additional April 115 call naked short for 2.60, day order.
The futures retreated sharply after topping less than two points above the 769.00 rally target identified here last week. Are they now about to plunge to 702.00, a possibility raised in yesterday’s tout? We’ll be better able to judge after stocks open this morning. Although the selloff created a bearish impulse leg on charts of 10-minute degree or less, it’ll take a decline to at least 738.90 to achieve this dubious feat on the hourly chart. Downside targets at 746.80 and 738.20 are shown in the accompanying chart, but neither is ideal for bottom-fishing because they roughly coincide with visually obvious lows to-the-left.
A bout of weakness today would likely bring the futures down to 907.70, a Hidden Pivot that’s not worth bottom fishing because of its close proximity to a visually obvious low recorded last Thursday. Its midpoint sibling lies at 916.50, but that number too holds little value for traders. My benchmark above is still 964.10, since a print there would cause the hourly chart to crackle with energy. The first hint of a strong move in that direction would come on a decisive thrust past 932.30, another hidden resistance.
A Trade We Like: Short Buffett, Long Paulson
by Rick Ackerman on March 18, 2009 3:00 am GMT · 3 comments
Since stocks started rallying a week ago, gold and silver futures have held up magnificently against a tide of silliness that has swelled on faintly improving perceptions of the economy. We should view the price of gold, above all, as a reality check on the global Carnivale, such as it is, but there will always be times when bullion’s cold, stern eye will be temporarily distracted by the irresistible hubris of a bear rally. Such as now. An unavoidable side effect of the current mini-mania for stocks has been the wild thrashing of precious metal quotes – or more recently, the tedious flatlining of quotes until some gratuitous spasm erupts for an hour or so just to scramble the players. But such histrionics make little sense to serious investors when bullion probes below $900; and so, with no rationale for going much lower, but no reason yet to blow the $1000 barrier to smithereens, gold will continue to seethe, waiting for the tide of silliness to recede.
And no one sounds sillier these days than our Fed Chairman, Helicopter Ben, who despite his nickname has tried everything except dropping $100 bills from the sky. With his factually empty talk about an end to the “recession” later in the year and a gradual recovery in 2010, he has begun to sound almost like Kudlow, CNBC’s all-purpose shill for anything that might cause » Read the full article