May 2009

An hour-long bounce yesterday from a Hidden Pivot at 918.10 that I flagged in the chat room ended ignominiously with a relapse to 915.20. This implies the futures will now fall to at least _____, a Hidden Pivot that you can bottom-fish with

Fear that Goldman's psychotic spree could hit $160 seems to have pervaded the chat room on Monday, so perhaps the stock is actually close to a top. Or maybe not. From a Hidden Pivot perspective, _____ is undeniably possible, although it would require yet more of the sort of elongated

Bears shouldn't get their hopes too high over this, but it is a fact that yesterday's short-squeeze failed to clear a series of peaks along the "wall" of last week's decline. This hints that the buying was too gutless to take on any more than the low hurdles posed by a couple of modest highs made on Thursday and Friday. A bullying rally is what it was

The bear rally that wouldn't die frolicked once again yesterday, leaving shorts badly bloodied and hanging from the ropes. The Dow Industrials, for one, opened sharply higher on a 100-point gap, then just kept going with only tepid pullbacks along the way.  The buying spree had been telegraphed the night before when the E-mini index futures appeared to struggle to reach a minor pullback target off Friday's highs.  Because of this, around 1 a.m. Monday, with the June E-Mini S&Ps trading around 878, we warned subscribers with short positions to brace for more insanity: "Bears would be wise to run for the hills if the futures pop above 897.00 today," we advised, "since that would turn the hourly chart unambiguously bullish. A subtler bullish signal would occur on the 15-minute chart at 885.00."  Not long afterward, both of these Hidden Pivots gave way, overpowered by short-covering on thin volume. And here's more bad news for bears: The short-squeeze appeared likely to continue into Tuesday, since there was a whiff of panicky buying in the closing minutes of the session. On the 15-minute chart, the Dow tacked on about 50 points on the final bar, suggesting that at least a few shorts had thrown in the towel. Ordinarily, a price spike on the final bell implies that the last bear has been wrung out. In this case, however, the spike was not quite steep enough to suggest this was the case. In any event, we took a small bearish position in the call options of FAZ, a trading vehicle that allows one to leverage the downside in the Russell Financial 1000. We bought for a pittance (1.20) some October calls that traded as high as 97.30 (!)  just before the bank stocks took off in early March. At the time we initiated

Posted by Rick for Don Cephus, here's a good list of housing crash links from patrick.net: More high-end properties sitting on the market (sfgate.com) Multimillion Dollar House Price Cuts (finance.yahoo.com) No sign of foreclosures slowing (nctimes.com) Silicon Valley Foreclosures To Accelerate (viewfromsiliconvalley.com) Las Vegas house prices plummet toward ZIP (lasvegassun.com) Mass auctions of foreclosed houses not as successful as billed (tampabay.com) Deep Property Depreciation Still Ahead (seekingalpha.com) States like California, Arizona and Florida still have far to fall (businesswire.com) Worst Is Yet To Come (finance.yahoo.com) Personal Credit Crisis Of NY Times Economics Reporter (nytimes.com) Who, Me? Yes You, Greenspan! (lewrockwell.com) $8000 tax credit not actually for downpayment (boston.com) Real Estate Developer Sues Banks That Loaned It Money (businessinsider.com) Mortgage modifications make housing dead asset class for years (fieldcheckgroup.com) TARP is a "sham" and a ripoff to taxpayers (huffingtonpost.com) 99 Years in Prison for Mortgage Fraud. Not a Typo (nationalmortgagenews.com) America Forgot Lessons It Taught China (nytimes.com) China's yuan 'set to usurp US dollar' as world reserve currency (telegraph.co.uk) Anatomy of an economic meltdown (sfgate.com) Jeff Walser, FDIC Economist, Charged With Attempted Bank Robbery (huffingtonpost.com) If you come across other good housing stories, please mail the link to p@patrick.net.

Speaking of Goldman's "attitude" today, which someone in the chat room mentioned, it's time to nibble on FAZ, which mimics the Russell Financial 1000 in reverse, 3x. Option implied volatilities are beyond stratospheric, but we can try to get around this by calendar

Check out today's analysis of the Dollar Index (DXY), since it lies within easy distance of a bullish threshold on the hourly chart. If we're in for a period of strength in the dollar, it's going to catch a lot of leverage artistes with their pants down.

There's an unachieved target down at _____, but we should monitor the Dollar Index closely right now, since just a little more upside would generate a bullish impulse leg on the hourly chart that could delay or eventually negate the target. Specifically, if DXY pops above

Goldman's narrow failure to surpass an autumn peak at 142.00 on the last rally spike suggests that the bear rally's days are numbered. Getting short could prove tricky, however, since we want to avoid doing so if the stock still has one last lunge left, as it well may. One way we'll be able to judge for ourselves whether this is likely is by observing the price action on a modest decline to _____. That is the midpoint support of