Friday, August 14, 2009

It's not for no good reason that Goldman's spectacular bull run has stalled where it did, at 170.94. Notice in the accompanying chart the high at 172.45 made nearly a year ago, in early September.  That is not what we call a "look-to-the-left" peak, since it lacks the whimsical subtlety of such resistance points. Rather, it is a very crucial resistance peak because Goldman fell apart right after it was recorded. Sellers up to this point have been trying to get their money back, or perhaps make a few bucks, but anyone still holding for a thrust above 172.45 is on probably on board for the long haul.  Odds of a "false" breakout seem low, but if the stock were indeed to collapse from a high above 172.45, it would rank as one of the wickedest bull traps in memory.

I'm straining for clues that might help predict the outcome of this epic battle between bulls and bears at cliff's edge. A bounce from a midpoint pivot at 78.16 would tip the bias bullish, since that would at least delay a further fall to its 'D' sibling at 77.81.

A rally target at _____ broached here earlier is in play, and we should be encouraged to think that it will be reached soon because the futures closed yesterday above its midpoint sibling, 15.050.  The target is sufficiently compelling that we should expect a stall there. However, if it impedes the bulls' progress for perhaps an hour or less, that would suggest there is more buying power waiting to be unleashed next week.

I'm going to consider the calendar spread as having been closed out for 0.40, which, when added to the 0.90 credit that was our cost basis, yielded a theoretical profit of $520 minus commissions. We'll try to re-establish a long position, but let's do it when SLW is weak rather than rallying toward the daunting resistance peak at 10.97 recorded in early June. 

The rally's stall at 963 yesterday validates a yet-to-be-achieved rally target at _____, since the target's midpoint sibling is 962.40 -- just 0.70 from the intraday high. The target looks like it's in-the-bag to me, but I'll be watching to see whether the futures push past it without much fuss, presumably drawn by a magnetic supposed barrier at $1000.

Yesterday's rally was noticeably lacking in oomph, having failed not only to reach a _____ Hidden Pivot target by eight points, but also to surpass the  less challenging resistance represented by last Friday's _____ high. The _____ target has been supplanted by a new one at ______, and it should be easily reachable if there's even a mild whiff of Friday craziness in the air.     

I've harped endlessly on the point that stagnant-to-falling incomes, soaring joblessness, imploding credit and collapsing asset values make inflation nearly impossible at this time. Here's our friend Senor Cuidado once again, explaining this more lucidly than I have.  He is responding to statements (in boldface) posed in the Rick's Picks forum by "Edward," who is needlessly concerned about $9-a-gallon gasoline and other supposed inflation threats: Gas will be 8 or 9 bucks a gallon -- and people will pay for it, because they will have no choice, just as they don't in Europe already. "Edward, the U.S. is not Europe. Our geography requires a lower gas price in order to keep our transportation grid flowing. Our economy would experience a devastating deflationary shock from $8-9 gas. I suppose the people might 'pay for it,' but then they won't have any money to go to restaurants, or buy any clothes, or go to the dentist. A quick tripling of the gas price from the current level would cause an extreme unemployment spike when discretionary income retailers are simply wiped out. Or prices will collapse along with demand for other items and services. "But I say the $9 price is not even possible because domestic gas demand will fall rapidly in response in any climb above $4. We were in the red zone at $4 gas last year. Even a $6 gas price probably means total defeat for most sitting politicians in the U.S., and radical new political pressures on the Saudis/OPEC. And $8 gas is radical: It probably means an outright military takeover of the Saudi Oil fields or the sudden end of new car sales in America.  Groceries and Gas "The price of oil is also the basis of the price of food. If Americans will be spending all of their