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From the monthly archives:
April 2009
My minimum downside projection for the near term is 44.36. That’s a midpoint Hidden Pivot, but I wouldn’t recommend bottom-fishing there since it comes off a continuous chart. A breach of that number would be bearish, a two-day close below it still moreso. The bear-market target thereafter would be 31.94 — still shy of the $20s I”d predicted a while back.
Implied volatilities have collapsed so badly that the September 270 put we hold for $8 can be bought for a bit less than that even though the stock is trading nearly $10 lower. My hunch is that option volatility will return once Google has had the opportunity to fall a further 50-70 points. We can wait, since our risk is small and we have gravity on our side. It should be noted that the stock’s daily chart is actually bullish at the moment and will remain so, technically speaking, until 355.31 is exceeded to the downside. I doubt that we’ll have to wait very long.
Goldman should lead the way down if the bear is about to emerge from hibernation, as we suspect it is. Please note that it would take merely a breach of 112.50 today to turn the daily chart bearish, and a print below 112.22 to queer the 0.618 Fibonacci support associated with the most recent rally leg. Ordinarily I’d suggest trying to leverage the stock’s impending fall by buying some long-dated, way-out-of-the-money puts that we could spread off later. However, option premiums have not collapsed in this stock as they have in most others, so any speculative buying of options that we do will need to occur when the stock is hitting a rally target. Stay tuned for further guidance.
DaBoyz let the futures grope their way relentlessly lower yesterday in search of a bottom that never materialized. Now, judging from the extremely timid action Monday night, the pros are as nervous as the amateurs concerning what might ensue. The two possible scenarios on which nearly everyone is focused are 1) the bear rally begun on March 6 is over; or 2) a sharp break, one with perhaps 2-3 days remaining, will be recouped quickly as the bear rally returns in earnest. My hunch is that the hoax has run its course and that the next leg down will see the futures fall to at least 734.25 by May. We’ll be better able to judge the likelihood of this once the futures have had time to interact with the 802.25 low recorded on April 10. If its breach should occur without an intervening rally of more than a day, that would create a bearish impulse leg of daily-chart magnitude.
Gold still looks buoyant after clawing its way higher yesterday, but the rally so far has not been particularly impressive. To avoid false hope or confusion, we’ll use 911.90 today as a bullish trigger, since that’s what it would take to turn the hourly chart positive. ( The number given here yesterday failed to do so on closer inspection, although it did signal the onset of a decent rally on the 15-minute chart.) In the meantime, the 845.20 downside target we’ve been using for several weeks is still valid and would grow even more compelling if the futures are unable to refresh the bull trend more or less daily on the hourly chart.
Friday’s peak occurred exactly where expected, and although the rally threatened to break above the 871.25 pivot, it ultimately failed by a single tick to trip our alarm. That would have warned of more upside to at least 890.00; instead, the futures sold off moderately into the close and continued to ease lower Sunday night. The selling didn’t look very serious, though, and we should infer that any further weakness will be reversed in the early going Monday. The first hint that the weakness is real, not stage-managed, would come on a print overnight at 853.50.
The Gold Bugs Index somewhat exceeded an important 341.01 rally target at its last peak, providing modest encouragement that the nasty selloff since has been corrective rather than impulsive. We’ll know more if and when HUI encounters a Hidden Pivot support at 265.12, my minimum downside projection for the near term. If the selling overshoots that mark and then continues to at least to 254.94, that would be a bearish sign going forward, implying more slippage to as low as 238.51 over the next 3-5 days.
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Greedy Bankers Not Entirely to Blame
by Rick Ackerman on April 21, 2009 1:11 am GMT · 2 comments
For a few bracing hours yesterday, everything seemed right with the world: stocks were getting pounded, gold and silver were moving energetically higher, and crude oil was plummeting just as it should in a world that is sinking into the mire of recession-or-worse. It was a welcome change from the surreal, feel-good mood that has pervaded the bourses in the U.S. and elsewhere since early March. Even the Wall Street Journal deferred to reality with this dog-bites-man story atop the front page: Bank Lending Keeps Dropping. Shocking, » Read the full article