Wednesday, July 22, 2009

The group in the chat room seems to concentrate on Gold and Oil as the prime vehicles for investment and trading.  Is it time to look at an out-of-favor commodity?  Is it time to plan for some future moves that could be very profitable? Take a look at natural gas.  It is not a buy right now, but it is time to start tracking it and a couple of stocks that could move very nicely in the future.  The stocks are DVN, and CHK,  both natural gas plays if you don't trade the future, or  UNG which is the natural gas ETF. There is a relationship between crude and Natural Gas.  It takes 6 times the natural gas to provide the same energy as a barrel of oil.  August Oil is currently traded at $64.81 a barrel and August Natural Gas, at $3.719.  On an equivalency basis natural gas should be trading at $10.80 or oil should be trading at $22.31. There are many firms as well as trucks and buses that have the choice of using either.  Because of the current price of natural gas, production is being cut.  These are some of the fundamental reasons why either oil comes down in price or NG goes higher.  The stocks usually move before the commodity so keep your eyes open for a trading opportunity.  Just one man's opinion.  Ira UPDATE (per Rick):  At 1:43 p.m., with September NatGas trading around 4.034, we can project a short-term top at 4.183. (10-minute chart, where A=3.408, from July 16). That number should be used as a minimum upside projection for now. 

Yesterday's push by the broad averages above June's peaks felt like a shot across the bow.  But was it perhaps so obvious and intimidating that we should play the contrarian?  In practice we can have it both ways by simply watching the impulse legs develop on the lesser charts. This should provide fodder for this morning's weekly tutorial session.  Please note that a new password is in effect for this session, so if you haven't registered yet, you should contact mikej165@gmail.com to be assured of gaining entry.

In after-hours trading Tuesday, AAPL had somewhat exceeded the 157.53 Hidden Pivot that we were using as a minimum upside target. The indicated high as of around 9 p.m. EDT was 158.40, which if correct would imply the rally is likely to continue to a target of higher degree. The logical number thereof would be _____, so we'll use it as our new objective. It implies an amazingly steep ascent and an ABC pattern with a trajectory that I cannot recall seeing before. 

The futures traded up to 89.23 on the opening bar yesterday, stopping out a Pick of the Day short at 89.21 for a tiny loss.  (If you were slow to react, or if you used a slightly wider stop, you could conceivably have come away with a profit, since the futures never traded above 89.27 and spent nearly the entire day below that number. The intraday low was 88.10.)  The fact that the upside target was exceeded, albeit only slightly, suggests still higher prices are coming. If so, look for a pop today to _____, a Hidden Pivot that you can try shorting with a stop-loss at _____.  You'll be on your own if the order fills, but don't hesitate to nail down a partial profit on a pullback of as little as 15 cents.

A print at 119^02 is needed by no later than Thursday to sustain the rally's momentum. That would refresh the bullish impulse on the hourly chart -- a key requirement for any rally that is going to develop "legs".

A Hidden Pivot at 959.90 is still my minimum upside target for the near term, but a pullback to 945.10 Tuesday night can be bought with a stop-loss as tight as three ticks. If it's hit, look for the selling to continue to exactly 940.30 (which also can be bottom-fished, stop 939.90). _______ UPDATE (1:08 a.m.):  The action has turned too sloppy to read, other than on the very lesser charts. My hunch is that tonight's gratuitous spasms will be replicated on a larger scale as the day wears on.

The E-Mini S&P poked its snout above June's peaks yesterday, daring bears to stand firm.  For our part, we'd prefer to step aside while the futures make their way toward _____, a Hidden Pivot from the weekly chart that will serve as a minimum upside objective for the near term.  Please note that that would fall a smidgen shy of the _____ print (see inset) we'd said was needed to refresh the bullish trend on the longer-term charts.

The stock market carved out yet another bowl-shaped formation on the intraday charts yesterday, making everyone who bought the dip a lucky winner. Stocks have swooned in four of the last five sessions and closed higher for six consecutive days, but yesterday's swoon was a little more dramatic than the others. Some attributed the selloff portion of the day to mounting concerns that President Obama's tax proposals will soak not only the "rich," but the middle class. Whatever misgivings investors may have had about this were forgotten later in the day, however, when Helicopter Ben, in testimony before Congress, promised there would be no tightening until such time as the tempo of the U.S. economy picks up significantly.  This should have come as good news to monetarists, since, given the grave structural weakness of the economy, it might be another ten years before things start to pick up significantly. Interest rates aside, our colleague Larry Amernick (click here to sample his work) sees clear evidence that the Fed has begun to withdraw liquidity from the markets. "The party's over folks!" he wrote recently. "The Fed's not your friend any more. It is slowly withdrawing the massive amount of liquidity that flooded the markets with excess reserves after the collapse of Lehman Brothers in October 2008. This is occurring at the same time the economy appears to be rolling over again." Larry believes, as we do, that the Fed did not accomplish much -- other than to goose shares: "Although fueling a short and powerful cyclical bull market during Q2 (with the S&P 500 up 43.4% from trough to peak)," he writes, "the Fed failed in its basic goal of providing full employment and stable prices. Alarmists argued that the 100%+ increase in the year-on-year change in the Monetary Base would