Tuesday, August 11, 2009

Our 'Goldman indicator' is flashing yellow, so let's keep a close eye on the 157.01 threshold where things could start to turn ugly.

A push past a midpoint resistance at 9370 would imply more upside to at least 9486, a Hidden Pivot that could be shorted with a very tight stop-loss.

The weekly chart looks quite robust, having created a bullish impulse leg back in May. However, it would take a two-bar close above the 368.45 midpoint pivot shown in the chart to signal that the consolidation is complete. Thereafter, HUI would become an odds-on bet to reach a minimum 433.67.

Conventional trendline support near 12.61 looks compelling enough to use as a minimum downside target for today. Alternatively, UNG would need to pop above 13.59 to turn the hourly chart bullish.

A decline today touching 157.01 would imply that the stock's problems are serious.  To leverage the downside speculatively with relatively little risk, I recommend buying the  ______ put spread for 3.40 up to a dozen times.  If anyone fills the order, which is good through Wednesday, please let me know in the chat room so that I can establish a tracking position for your further guidance.

We're still trying to exit four September 10-August 10 calendar spreads for 0.50, a gain that would come on top of a 0.90 credit that is our effective cost basis. Today, bid 0.15 to cover the short August calls, but lower it to 0.10 if SLW touches 9.40 intraday.   

When we dropped out of the inflation/deflation debate a while ago, we asked the inflationists to wake us when the price of suburban homes reached a quadrillion dollars. Wouldn't that be nice for the fifty million or so Americans who owe more on their homes than they're worth! Anyway, the topic continues to percolate in the Rick's Picks forum, including this recent, astute post from "Senor Cuidado". Like us, the Senor doubts inflation is lurking around the bend: Tahoe Billy, you priced gold and eggs but you left out oil. Oil is key to the U.S. economy. With gold at $3,000, what is the oil price going to be? And how are Americans going to afford the new stratospheric oil price? You also left out any interest rate prognostication. My advice is to read bloggers Ackerman, Shedlock, Denninger et al. and get a handle on the financial reality of the massive real estate bubble: No economy in history has ever inflated out of a collapsing real estate bubble because the higher interest rates that accompany inflation paradoxically depress the real estate market even more; therefore, further economic contraction and deflation are assured. Printing Money Illegal This dynamic is doubly inescapable in the USA because of the Fed's creation-of-money mechanism, [the purpose of which] is to loan new money into existence. It is through debt creation that the money supply in America is increased, and there is no legal way to simply "print" money under current law. That is why there can be no inflation until all of the bad real estate debt is worked out of the system by, say, 2012 at the earliest. The bottom line is that our situation is not the 1970s all over again. The economic dislocations of the 1970s were not caused by a massive real

Bid 2.45 for two October 91 puts (DAVVM).  That's about what they should  sell for if the Diamonds push up to a minor midpoint resistance at 94.04 that could turn out to be something more. This is a speculative play -- playing contrary to myself, really --  so I am not recommending that you act aggressively. I am recommending the trade because I find myself all-too-routinely and reflexively forecasting higher prices for all of the index futures these days.  I have made this a limit order so that anyone can attempt it using an order parked with your broker.

I mentioned a downside target at _____ in an update  yesterday, but there's another at ______ that looks more compelling. Bottom-fishers can nibble there with a very tight stop-loss, but my hunch is that the futures will fall to the lower number if the first is exceeded by 80 cents or more. Alternatively, a run-up to at least _____ would be needed today to turn the hourly chart buoyant once again.