Wednesday, August 19, 2009

It's 3:38 a.m. in New York, and Asian markets are getting whacked. I've lowered the bid for Goldman calls to "stink-bid" levels, since it is still the stock to own if you're looking for upside exposure.  A bid for Akamai shares can stand as given, since we're only risking $6o theoretical to try and scoop stock at a Hidden Pivot bottom. It should be interesting to see how Goldman shares react to a global cascade, assuming there is one, but a bearish island-gap reversal at this point -- very rare indeed -- is likely to become a daunting impediment.

The bonds have looked pretty good these last couple of weeks, but it's been nearly two months since any rally managed to create a bullish impulse leg on the daily chart. There have in fact been three failures to do so, and this will make a fourth if it fizzles out anywhere south of _____.

It's do or die here, since UNG looks likely to grope its way down to at least 11.31 if it doesn't pick up support from mid-July's lows near 12.

The maniacs who dominate in this stock left a relatively rare and unquestionably bullish island-gap reversal on the hourly chart yesterday, threatening bears with a frontal assault if they should grow too bold. Since Goldman is still our favorite bellwether, we should take the threat seriously to the extent that the stock is capable of dragging the entire market higher if it catches fire.  I had suggested a mechanically inspired short in the SKF Ultrshort Financials -- a bullish play on the banks -- and this latest development in Goldman seems to explain why SKF's rally could be short-lived.  Instead, let's speculative modestly in Goldman itself, bidding 2.60 on the opening for one ____ call. If the order goes unfilled, lower the bid to 2.40 and keep it there as long as the stock doesn't fall below 160.00.

The downside target at 17.04 is still valid, so let's try bottom-fishing there once again by bidding 17.07 for 400 shares, stop 16.89.

The rally off Monday's secondary low (931.80) projects to _____-- 1.50 points above yesterday's high. The target is still valid, although it would have made a better short if it had been hit on the first try, a modest spike this evening around 8:30 p.m. EDT. What matters most at this point is not that a would-be opportunity has curdled, but that the futures are not showing enough oomph, even, to reach a relatively easy target.  That could still happen tonight or Wednesday morning, but I'd need to see a thrust exceeding 946.20 to be convinced that buyers are capable of taking charge. With a 950.70 print, they would BE in charge.

I put out a shortable target at 993.25 in the chat room yesterday more than an hour before the close, but the futures went nowhere, and the absolutely lifeless action since has turned the pivot to dross; it is no longer usable.  I've included a chart so you can see for yourself that, despite the tedium, there are still excellent opportunities to be had intraday. They can be found mainly on the lesser charts, and in instances where all of our Hidden Pivot rules have been met. In this case, we've got it in spades: 1) A, B & C coordinates all etched by a single bar; 2) a quite subtle, one-off 'A';   3) an impulse leg that has quietly pushed past the required two prior peaks, and 4)  a meandering C-D leg to keep other traders and technicians from recognizing the rules-based charm of the overall pattern. What we lacked was enough buying energy to get the futures to the target. Still, seven hours later, longs from the conventional point 'X' entry price would still be in-the-black, albeit slightly.

I thought I'd overdosed on the inflation vs. deflation debate, but that was before I started reading Adam Fergusson's When Money Dies: The Nightmare of the Weimar Collapse. Fascinating stuff. Anyone who thinks it couldn't happen here is right in one respect: It won't take ten years to play out in the U.S., as it did in Germany.  Far from it. My guess is that our own hyperinflation nightmare - and we will have one once deflation has had its way with all who borrowed more than they can ever pay back -- will be over within ten days of the initial panic. Then it will be back to deflation for another 20-30 years. Are you ready for it? Investors shouldn't kid themselves about being able to avoid all the whipsaws. Just when you're patting yourself on the back for scoring some ingots for $2000 an ounce after bullion has shot up to $5000 in mere days, quotes could plummet back down to $2000 in a blink. That would hardly be a catastrophe for long-term bulls who have been accumulating the stuff since it was $300 an ounce. But what about the guy who bet the ranch at $5000, thinking he'd get $10,000 from some greater fool a week later?  Which raises another tricky question:  When you sell your gold, what do you accept as payment?  Do you risk taking dollars whose purchasing power could fall by half overnight, as the German mark did? Few Winners Fergusson's book makes clear that there were few winners and almost no big winners. Farmers made out pretty well, of course, because a potato was a potato no matter how many marks it took to buy one.  In fact, some who borrowed heavily to buy farms when hyperinflation took off in 1922 were able