Monday, June 1, 2009

A Hidden Pivot at 68.05 identified here earlier is still my minimum upside objective, but it is also a potential swing high that can be shorted with a stop-loss as tight as 21 cents. Please note that there is an alternative target at 67.67, but a short at that price looks somewhat riskier to me than one initiated at the higher number.  I've included a chart that shows how both targets were derived. _____ UPDATE (6:11 a.m. EDT):  The stop-loss proved too tight by three cents -- an error in judgment that you should jot down, since your instincts are probably better than mine when it comes to calculating a stop-loss for this vehicle.

We shorted four June 10 calls on Friday for 0.70, effectively legging into the September 10-June 10 calendar spread for "even" (i.e., our cost basis is zero).  Although we cannot lose money on this position, it has the potential to produce a gain of as much as $500 or so if SLW is trading close to the $10 strike when the June calls expire on the 19th.  Now let's see if we can build in a little more profit at the 12.5 strike, bidding 0.25 for four July 12.5 calls (SLWGV), day order. 

Friday's nasty short-squeeze in the final minutes of the session handily exceeded a Hidden Pivot resistance at 922.00, paving the way for more of the same Sunday night/Monday morning. The futures were up moderately around 10 p.m., presumably developing thrust for a leap to as high as _____. The midpoint resistance associated with that number lies at 928.75, but it's not worth much for trading purposes because a print there would be a breakout above Friday's high. From a big-picture perspective, the two peaks to beat lie at ____ and _____. Both are shown on the accompanying chart, and if they are exceeded impulsively (i.e., by a rally with no b-c pullback), even the most ardent bears will have to rethink their case -- or get out of the way.

DaBoyz are doing a respectable job Sunday night keeping Friday's short squeeze from running away before they get their opportunity to shake down widows, orphans and pensioners before the opening bell.  Keep the 940.75 E-Minni S&P target in mind if and when They let 'er rip.

The dollar's bounce last week from a Hidden Pivot support that we'd drum-rolled here lasted all of four days, suggesting that more weakness is on its way.  If so, we should look for gold quotes to blow past $1,000 by no later than mid-week. Our immediate target for the August Comex contract is 1066.40, subject to a "hidden" resistance just above at 985.80. A two-day close above that last number, or a trade more than $4 above it intraday, would be quite bullish for the near term. Will this be the rally that starts gold on its way into the stratosphere?  We have our doubts, since gold's short-term charts suggest quiet strength, but not yet explosive power. That could change overnight, however, if the dollar is about to go "kamikaze." The fact that the Dollar Index has failed to gain traction at some key technical levels in recent weeks is ominous. The trade-weighted Dollar Index settled on Friday at 79.34 and looks primed to test a key support at 77.69 recorded last December. That would represent a 2% decline from current levels, but if the support fails, we might see some panic spread into other markets, particularly T-Bonds. Scary Bond Picture There are already some disquieting signs in the bond pits, notwithstanding a sharp rally in the price of Treasury debt at the end of last week.  The price surge on Thursday and Friday partially recouped earlier, heavy losses sustained in the days immediately before and after Memorial Day. But the bigger picture is growing downright scary, since T-Bond yields have crept back up to where they were before the spectacular futures rally in mid-March, when it was announced that the Federal Reserve was about to embark on a program of "qualitative easing." That's just a euphemism for direct monetization

Shortly before 8 p.m. Sunday, the futures looked like they were struggling to go lower -- which is as it should be if the dominant trend is robustly bullish.  The minor correction so far has bounced precisely from a hidden pivot midpoint at 977. 70 (actually, a moment later, when I took a snapshot of the chart, it finally broke the support) , but I wouldn't recommend buying there on a re-rest. Less risky would be to bid ____ overnight, stop _____.  If the futures take off without deferring to our bid below the market, you can try entering on a "camouflaged" impulse leg that tops somewhere between the two minor peaks that I've labeled in the chart. _______ UPDATE (7:08 a.m. EDT): The 1066.40 target drum-rolled in today's commentary is very much in play now that its sibling midpoint at 985.20 has been eclipsed by nearly five points. A two-day close above the latter number would all but clinch it.