No surprises so far this morning, since the “Goldman indicator” seems to be working just fine: stocks opened down — a Monday morning shakeout maneuvered by buyers — but a recalcitrant Goldman is now pulling the entire market back up to “unchanged.” It hasn’t hurt that another invincible stock, Apple, is bucking the engineered selloff. Keep that 871.25 E-Mini S&P target in mind, since it is all but guaranteed to be reached by tomorrow or Wednesday.
COMMENTARY for Monday
Rick's Picks for Monday
Friday’s $10 thrust was a short-squeeze truly worthy of the name, since it came on news that the company plans to float a zillion new shares while the gettin’s good. We hesitate to predict how high the squeeze will go, especially with index futures evidently under pressure Sunday night. But our hunch is that stocks will get dragged higher by Goldman rather than the other way around. If so, look for the rally to continue to at least 131.80, a good place to try shorting on your terms with a tight stop-loss. Our multi-layered option position stands to do well no matter what the stock does, but maximum profitability would come this Friday with GS trading in the range $113-$123. _______ UPDATE (12:40 p.m.): With Goldman receding from this morning’s short-squeeze high, I’m going to recommend that you try to add two April 130-135 call spreads to the position for around 1.60. _____ FURTHER UPDATE (12:48 p.m.): Goldman got down as low as 126.70 on the pullback, so the spread was fairly easy to buy for 1.60. We’ll carry it officially for 1.70, which now gives us four April 130-135 spreads with an average price of 1.03. Now, if the stocks finishes well below $130 this Friday and turns the vertical spreads into losers, so much the better, since it means our calendar spreads at the 115 and 120 strikes will be even bigger winners. We will also pick up $100 per point profit to the downside because we are short an extra April 115 call. _______ TARGET REVISION: The 131.80 target will do fine for scalpers who stick to the tight stop-loss I’ve advised. However, I now expect GS to reach a minimum 143.02 in this run-up. Patient bears should factor this prospect into their short-term outlook for the stock market, since it would seem to put the Dow well above the 8200 threshold I’d pegged a while back.
A Wall Street Journal story out over the weekend told how Steve Jobs has continued to run the show while on medical leave. He’s due back in late June, but in the meantime we should expect Apple shares to move relentlessly higher — most immediately to the 130.26 Hidden Pivot target shown in the chart. I usually don’t like to extrpolate C-D follow-through legs from AB impulse legs as steep and breathless as this one, but Apple’s revenue picture is so promising that it seems warranted in this instance.
Gold was wafting ever-so-gently higher Sunday around midnight, but it will still need to push above the modest threshold at 899.50 flagged here last week in order to discomfort shorts. That’s what it will take to trigger the kind of buying spree needed for a sustained push and some basing action above $900. With respect to Hidden Pivot targets immediately above, the nearest lies at 893.70, and if it is easily breached this morning we can expect a test of the 899.50 resistance.
The 871.25 rally target broached here last week looks as compelling as ever, and any minor patterns that turn up on the lesser charts should therefore be used aggressively to leverage what’s left of the move. (And so should a pullback to 836.75, since that is the Hidden Pivot midpoint — now support — associated with the target. ) Nightowls may have noticed that the bounce Sunday evening came off a midpoint support at 845.50 (1-min, A=854 on Friday). It should not be used for bottom-fishing on a re-test, but from an analytical standpoint, any progress this evening or Monday morning above 849.50 (aka point ‘C’) would be warning shorts to run for cover.
A rally target at exactly 8287 is equivalent to the one we’ve been using for the E-Mini S&P. Leveraging the upside will be catch-as-catch-can for night owls, but officially I’ll recommend shorting 8287 via an 8285 offer, stop 8295. Switch to a 20-point trailing stop on a pullback to 8235, and use 8170 as a minimum objective.
DXY could create a potent bullish impulse leg with a relatively short thrust to 86.55, although there was no technical evidence Sunday night that such a move was imminent. The key to the short-term chart lies in a look-to-the-left peak at 86.54 recorded in mid-March on the way down. DXY has been in no rush to exceed that peak, and the action since has been marked by dueling impulse legs, bullish and bearish, of nearly equal degree. Since any breakout could be both significant and subtle, we should set an alert at 86.55 to keep on top of this vehicle.
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Stimulus at Its Most Frightening
by Rick Ackerman on April 13, 2009 2:54 am GMT · 6 comments
If you thought Geithner, Bernanke & Friends were out of touch with the basic principles of Econ 101 — i.e., Savings=Investment — you should listen to what some private economists are saying. Richard Koo, for instance. He is Nomura’s chief economist and therefore about as mainstream as they come. But to hear him speak his mind o
n how to end the recession is to despair of the possibility that private capital will have a significant role to play in whatever economy emerges from the ruins of the one now dying.
Koo evidently thinks the U.S. has something to learn from Japan’s death-like experience with deflation and prolonged recession. However, his advice to U.S. policymakers overlooks the fact that Japan itself has yet to escape the deflationary drag that has constrained the island nation’s economy for the last 20 years. Ignoring this depressing fact, Koo emphasizes instead that Japan managed via heroic fiscal stimulus to keep the country’s GDP from falling even as deflation destroyed wealth equivalent to three years’ GDP. Is it possible the economy » Read the full article