June 2009

If the E-Mini chart was human -- which, in a way, it is -- I'd have to keep holding a mirror under its nose to make sure it was still alive.  Nonetheless, I still see a descent to at least 879.50 as both logical and likely, followed by a second wave of selling that hits 869.50. The latter number, a Hidden Pivot, is where I'd suggest bottom-fishing, using a three-tick stop-loss.  Alternatively, and so that we don't get caught unawares by a turn from somewhere above our targets, use 898.25 as a bullish trigger. _______ UPDATE (2:53 p.m.): A rally driven by the Fed-watching obsessions of the moment went against the forecast, but it was easily identifiable as a fraud, since even on the 15-minute chart there were no impulse legs to reckon.  The high reached 906.50, but I''d suggest going back to sleep until such time as 925.00 is hit, since that's what it would take to turn the lowly 15-minute chart bullish.

It takes some getting used to whenever the phrase "flight to quality" pops up in print or on the business shows these days. Supposedly, that is what has been driving Treasury Bond prices sharply higher since June 11, when futures contracts on 30-Year U.S. Treasurys bottomed at 111^21. That equates to a yield of about 4.84 percent. Yesterday the same contract settled at 117^11, so eager were buyers, evidently, to lock in 30-year rates of around 4.37 percent. (For the record, we are predicting that yields on the long bond will fall a further 17 basis points, to 4.20 percent, before this lemming-driven fad feints toward sanity.) We're tempted to say the buyers of these bonds are out of their minds, since, in the newsletter world, if not in the mainstream press, Treasury paper is intrinsically worth no more than toilet paper. This isn't conjecture, mind you, it's just simple math. Pile up enough trillions in debts, and eventually repayment of those debts becomes impossible. That's where the U.S. is now, mathematically speaking, even if the institutional biggies who live off the yield curve would prefer to act as though things will somehow turn out better for us all.  They, Too, Can Read Actually, in their private lives, T-bond buyers probably have faced the facts. After all, they read the same headlines that you and I read, and they know, as you and I know, that all is not well with the financial system. They know, for instance, that 40 banks have failed so far this year, and that the pace of these failures shows no sign of abating. They also know that so-called quantitative easing has been a failure, since long-dated Treasurys, even when buoyed by a flight to alleged quality, are in real terms close to inflicting a fatal

With Comex Gold approaching some promising Hidden Pivot supports, I've provided bottom-fishing advice in several precious-metal vehicles. With respect to the broad averages, any bottom-fishing should be done with rigorous attention to stops, since stocks are feeling very heavy at these levels.

I expect sellers to push the Gold Miners ETF down to at least 34.10 before it turns around. If the opportunity arises, we'll attempt bottom-fishing there.

If the futures close beneath a midpoint Hidden Pivot support at 1.3792, my minimum downside objective for the near term, look for the selling to continue to at least 1.3577.

There's a subtle but promising Hidden Pivot support at 13.260 where you could try bottom-fishing today with a stop-loss as tight as three ticks. That number can serve as a mininum downside objective  for the near term, but if it's decisively breached brace for more slippage over the near term to as low as 12.790.

With gold futures approaching a tradable turn, we can try bottom-fishing in this vehicle by bidding 3.10 for _____ calls.  That would be an attractive price if the stock dips down to _____, a Hidden Pivot support, before turning around.  You can pay a 0.10 to 0.15 more if the calls are out of reach.

The futures have fallen to within $2 of the _____ pivot we were using as a minimum downside objective for the short term, but in off-hours trading Monday night they appeared capable of pushing the support aside and continuing down to ____.  I'll recommend bottom-fishing there with a minimum 0.40 stop-loss, but if it's hit we should infer more downside to at least _____, a Hidden Pivot that can also be bottom-fished with a very tight stop-loss. Both targets are shown in the accompanying chart.

In after-hours trading the futures were stalled at midpoint resistance, _____.  If they get past it, however, a Hidden Pivot at ____ would be in play, and with it the potential to kick the hourly chart into high gear.  Please note that a rally achieving _____ would have exceeded a total of three prior peaks, including two "externals," signaling a move of at least three to four weeks' duration. Once above _____, a path would be open to around _____.