April 21st, 2014
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Bank Scare a Ruse to Shake the Tree

by Rick Ackerman on September 2, 2009 12:22 am GMT · 6 comments

A run on a major U.S. bank?  Who could have been spreading such scurrilous rumors? They surfaced yesterday in the Rick’s Picks chat room, and elsewhere, not long after we’d done some personal banking ourselves in an online account at the very same bank. We experienced no delays or problems with the transaction, notwithstanding reports of a “default situation” and “elevated” buying of put options on the shares of the bank.  We were able to confirm that there had indeed been a flurry of put-buying, but the action was not so frenetic as to suggest that the bank was in any serious trouble. 

bankers

To the contrary, banks are operating under such loosey-goosey rules right now that they shouldn’t have a care in the world. Imagine having a notarized letter from your local police chief authorizing you to loot and plunder any store in the neighborhood without fear of arrest. That’s how the banks are doing business these days – which is to say, however they want.  And if a deal should turn sour it’s no problem, since the U.S. government has assured banks that it will pay 100 cents on the dollar for any securities that ultimately fail to clear the market.

Smoldering Ruins

Tuesday’s rumors of a big bank on the ropes evidently were prompted by general weakness in banking shares. The selling had been attributed to nervousness over the prospect of more losses to come in the banking sector. A few analysts added to the stresses of the day by speaking cautiously about bank shares.  Has the spectacular rally begun last November finally run out of steam, they asked? We seriously doubt it. More likely is that those who have been accumulating bank shares hand-over-fist simply backed off their bids for a day, allowing the stocks to fall to more appealing levels.

Bloomberg, CNBC, the Wall Street Journal and all the rest bought into this ruse with a deluge of commentary concerning how financial stocks supposedly have gotten too far ahead of “fundamentals”. Fundamentals!?  If the day ever comes when fundamental analysis is applied rigorously to securities markets, the financial system will be reduced to a smoldering ruin in mere days. For the time being, though, the bankers are enjoying a holiday from scrutiny that makes all things possible. Under the circumstances, with Tammany Hall sensibilities determining the course of the financial system, we should not be looking for a top in banking shares, only an occasional pause in their upward spiral.

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TODAY'S ACTION for Wednesday

Against the Grain…

by Rick Ackerman on September 2, 2009 1:18 am GMT

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Rick's Picks for Wednesday
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GCZ09 – Comex December Gold (Last:955.00)

by Rick Ackerman on September 2, 2009 12:44 am GMT

The futures spent the day struggling to go lower, failing in the end to overpower a midpoint support at 947.60 whose breach would have greased the skids down to 938.70. The bearish pattern is shown in the accompanying chart, and as you can see, the pre-dawn bounce came from a low that lay within a single tick of the pattern’s calculated midpoint. The reactive rally was no world-beater, to be sure, but on balance the picture is at least mildly bullish for the near term.  A 978.00 rally target given here earlier remains viable, but like you I am growing a bit impatient about it.

GS – Goldman Sachs (Last:162.03)

by Rick Ackerman on September 2, 2009 12:53 am GMT

Yesterday’s savaging did no damage whatsoever to the bullishness of the daily chart, although there is still room to fall on the lesser intraday charts. Specifically, a Hidden Pivot target at 158.90 looks like a good place to try bottom-fishing. Officially we’ll bid 158.93 for 200 shares, stop 158.79.  We continue to hold the Jan 130 – Oct 130 put spread four times for 3.40 and a September 170 call for 2.00. _______ UPDATE: The bottom-fishing gambit worked out nicely, since the stock rallied $1.08 after making a low at 158.90 around midway into the session. You would have needed to apply a trailing stop, though, since Goldman subsequently relapsed to 158.14 before the closing bell.

SIU09 – Comex December Silver (Last:14.970)

by Rick Ackerman on September 2, 2009 1:01 am GMT

Silver effected a promising spike yesterday afternoon, but the futures were struggling to hold onto the gain early in the evening.  If they go no lower than 14.940 overnight, however, any rally exceeding the relevant midpoint resistance at 15.155 would suggest additional upside potential over the near term to as high as 15.365.

DXY – NYBOT Dollar Index (Last:78.80)

by Rick Ackerman on September 2, 2009 1:12 am GMT

The rally looked altogether unimpressive until late in the session, when a fleeting spike surpassed a look-to-the-left peak at 78.91 that I’d flagged in the chat room. That gives the rally nominal appeal on the lesser charts, although we should require 79.79 today to validate it. The location of the obscure but important peak-let this would surpass is shown in the accompanying chart.

$DXY – NYBOT Dollar Index (Last:79.89)

by Rick Ackerman on April 21, 2014 5:25 am GMT

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$ESM14 – June E-Mini S&P (Last:1861.50)

by Rick Ackerman on April 21, 2014 3:39 am GMT

Late Sunday night, it’s anyone’s guess whether DaBoyz are fixing to run stops above the 1867.50 peak shown. That’s assuming there’s enough short-covering fear to pull it off, which appears not to be the case at the moment. Far more ambitious would be a push above the April 4 peak at 1892.50 to new all-time highs.  Assuming that’s about to happen, it’s highly doubtful it will be by way of an impulse leg that exceeds both of the peaks in a single, unpaused leap.  More likely is a push today above peak #1 that would probably spell death-by-Chinese-water-torture for shorts in the days ahead. In any event, your trading bias should be bullish above 1867.50, with entry based on whatever uptrending ABC ‘camouflage’ patterns you can find on charts of 15-minute degree or less. Keep in mind that the first such opportunity signaled, as opposed to one further along in the uptrend, would be the least risky to trade.

$GCM14 – June Gold (Last:1295.10)

by Rick Ackerman on April 21, 2014 2:49 am GMT

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$USM14 – June T-Bond (Last:134^01)

by Rick Ackerman on April 2, 2014 3:21 am GMT

We don’t pay much attention to this vehicle other than at key turning points, but the short-term pattern shown looks like a lay-up for traders who see futures contracts as no more than bouncing dots on a chart, waiting to be exploited. There are actually two trade possibilities here: 1) a ‘camouflage’ short as USM slips below the 132^13 midpoint; 2) and a very tightly stopped long from within a tick or two of the 131^17 target. Good luck!  Please report any fills in the chat room so that I can establish a tracking position for your further guidance. ______ UPDATE (3:17 p.m. ET): The short was tricky to initiate, but once aboard, your reward came quickly with a drop to a so-far low at  131^26. As noted above, the short should be covered and reversed near 131^17. ______ UPDATE (April 6, 3:57 p.m.): The low of Friday’s violent price swings was 131^21 — not quite close enough to have gotten you long easily. Although this could prove to be an important low for the short- to intermediate term, under the circumstances I’ll assume no subscribers were filled. _______ UPDATE (April 11, 1:03 a.m.): Next important stop on the way higher: 135^17. _______ UPDATE (April 20, 11:10 p.m. ET): Last week’s fleeting stab to 135^10 came within less than a quarter-point of my target — close enough for us to consider it fulfilled. It took the futures more than a month to get there, so we should expect this correction-or-worse to last for at least a week or so before bulls attempt to push T-Bonds to new recovery highs.

HGK14 – May Copper (Last:2.9820)

by Rick Ackerman on March 31, 2014 12:20 am GMT

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SIDE BETS for Wednesday

ESU09 – September E-Mini S&P (Last: 996.00)

by Rick Ackerman on September 2, 2009 12:57 am GMT

Below 999.75, there were no more Hidden Pivot targets to project yesterday using the hourly chart. That is still the case, although we can use the breach of a look-to-the-left peak at 1009.50 to signal us when ES is turning around.


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