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COMMENTARY for Saturday
TODAY'S ACTION for Friday
Rick's Picks for Friday
An hour or so before yesterday’s close, a hawk-eyed pivoteer found the 1521.25 target show in the chart. Alas, the futures titillated with a last-minute push to 1520.25, leaving too little time to initiate a trade with any hope of exiting comfortably before the close with a gain. Even so, the analytical usefulness of the target remains, since, if it fails to contain short-covering this morning, we should brace for panic buying that could push the futures as high as 1562.25 over the near term. In case you’re interested, that target comes from the hourly chart, where A=1346.00 (May 26).
Perhaps I’ve been beating the bullish drum a bit hard lately? I do it to remind myself – and all of you — that stocks can and will continue to move higher as long as most of us continue to be outraged by the very audaciousness of it. We know the rally cannot be anticipating “recovery,” since even blithering-idiot bulls can see that no recovery is even remotely possibly over the next two or three years for state and local governments. But what does that matter when you have short-covering panics capable of turning bearish head-and-shoulder patterns like the one shown in the chart into launching pads almost overnight? The rally looks hellbent on challenging June’s highs, and I wouldn’t bet too heavily on a failure at this point. In any case, shorting just below these highs looks like Russian roulette to me — with three bullets chambered.
The lunatics were out in force after the close on Thursday, trying frantically to read meaning into the $4.07 billion earnings Google just announced for the second quarter. This beat analysts expectations by a hair, and the company called it a “very good quarter.” However, traders were reluctant as always to act as though any such pronouncement could be taken at face value, and as a result, the stock was gyrating wildly early Thursday evening. It is trading at an indicated 427.41 at the moment, but we’ll go out on a limb with a prediction of 453.32 before buyers are spent for the near term.
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Take any dozen good reasons for being bearish right now and they still don’t equal the bullishness of the chart shown. The undeniably compelling rally objective is 13085, a 4.8% move from current levels, and one can only surmise that the dusting the 12158 midpoint received on the last pullback (12/28) all but clinched a finishing stroke to the higher number. Moreover, it implies that bears shouldn’t get their hopes too high even if, in the next few days, the Dow plummets 324 points to retest the midpoint support. As of now, that would signal not weakness, but a screaming opportunity to get long. Hard to believe, really, but that’s what the charts say.
INTRADAY TRADING NOTES for Friday
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SIDE BETS for Friday
The rally off the recent low near 300 shows promise, but we’ll break out the bubbly if and when it clears two peaks made since early June, the higher of which lies at 373.52.
The futures bounced from a low yesterday of 934.50, the precise midpoint of a corrective pattern projecting to 930.80. The latter number is a buy, even if there was no evidence the futures are about to give up that much ground before resuming the uptrend. Camouflage will be tough to find if you want to board with-the-trend, but I’d suggest using a 939.30 print as a breakout indicator.
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Rick’s Picks Weekend Edition
by Stephanie DeMaria on July 18, 2009 12:01 am GMT
Gold As Insurance
(Following is the third installment in a series of articles by Chuck Cohen, a seasoned and highly successful investment consultant who lives in New York City. We will be featuring Chuck’s thoughts regularly at Rick’s Picks in order to expand our coverage, in particular, of junior mining shares, a core area of his expertise. In the coming weeks, Chuck will take up the topics of gold as a core investment, and gold as a speculative vehicle. Today he tackles gold’s usefulness as insurance against financial calamity“. RA)
No One-Size-Fits-All Strategy
In spite of the sharp drop in shares over the past nine years or so, most investors remain firmly committed to common stocks. Mutual fund statistics show that very few holders have pulled their money out of their funds. And the recent “Big Money Poll” in Barron’s shows that the big guys are even surer than they were even at the very top. It is clear that investors have been stirred, but far from shaken, by the decade’s decline and by our faltering economy.
And gold? To many investors and even professionals, buying gold is like traveling to Myanmar or northern Pakistan: Few dare to venture there. The truth is, that to our Ivy League and Keynesian educated financial community, gold is viewed as a superstitious…
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Money management
There are systems that are based upon money management alone. The principle is basically the 1/2 way to the wall principle. If each time you go 1/2 way to the wall you will never get there. I have heard so many say that they will take 10% loss or a 5% stop. That like the 1/2 way to the wall theory is, if each time you take a 5% loss you can never be out of money. A stop shouldn’t be based upon financial pain it should be based upon the fact that the chart says you are wrong. I use a 2% risk factor. That means if I had a $10,000 account I could risk $200 on each trade. I would then look for a trade where a move of $200 would make me wrong. So the trade is adjusted to that risk parameter. If it requires you moving down to 60 min. chart or 15 min. chart to do that then that is where you should be trading.
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Ira’s Last Day
I will have to say that it has been fun meeting a whole new group of people. Each of you is unique in his or her own way. I have enjoyed the back and forth with Hunt. My wife and I still remember him fondly and can’t figure out any reason for him to still live in Texas. The chat room has been filled with grumbles of late claiming conspiracy theories. Goldman Sachs has become the giant conspirator and the government and all of its agencies remain the great Satan. There always seems to be someone or something that is doing you dirt. Why don’t you take a look at how this can be your edge? My philosophy has always been follow the money. I don’t care if it is GS or the Fed. Let them run it any way they want I’ll just get on board and take my little piece of the pie. I am not greedy. So I don’t care if gold goes to $1300 or back to $350, I will take my piece of the action and leave the rest to others. Writing here has restricted my trading, but on Thursday I will start up again. You should be able to consider the market as your private ATM machine and tap it any time that you need some extra money. There are loses. I know that I am not perfect and I know that the only one that is going to cost me money is me, not GS, the Fed or anyone on the floor of any of the exchanges. Once you learn to accept the full responsibility for your actions you will find it a lot easier to trade successfully because you won’t be looking for someone to blame for everything that goes wrong with your account. Each night you should go over your trades and see what you did right and what you did wrong. Making money has nothing to do with right or wrong. If you followed your system you did right, win of lose. Rick will make mistakes and bad calls and I will make mistakes and bad calls. If you don’t do anything you can’t make a mistake, and that is the greatest mistake of all.
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A Hula Dance in Our Future?
The Dow Industrials lurched 256 points higher yesterday, but a trader looking for action might have found himself bored to tears nonetheless. Indeed, anyone who failed to go home long the day before would have been left twiddling his thumbs Wednesday morning, since stocks bolted for the wild blue yonder on the opening bell. Like nearly all powerful rallies, the move began with a short-covering panic. However, this one was quite unusual in that it had begun on a gap at the start of after-hours trading the evening before. We can’t remember the…
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A Huge Rally? Don’t Laugh…
Just because there are a dozen great reasons to hate stocks right now doesn’t necessarily mean they can’t go much higher. Not only that, the bear rally could continue for quite a while – till 2011 and beyond, even – without distorting the bearish look of the long-term charts one bit. Take a look at the monthly chart below, which shows ten years’ worth of price action in the S&P 500 futures. Nine of those years have seen a bear market brought on by the collapse of tech stocks in 2000. But notice how, when the major bear phase ended two-and-a-half years later, the S&Ps embarked on a rally that lasted five years and which…
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