Wednesday, September 9, 2009

A minor Hidden Pivot resistance at 10.57 is the nearest impediment, but if UNG gets past it and a peak at 10.75 made in late August on the way down, it would be clearing the path for yet more upside. The implications will not affect the daily chart, however, until 16.27 is touched.

The E-Mini S&P spent all of yesterday pussyfooting below a not-so-formidable peak made a week earlier, so we should not regard the bullish target at 1053.00 given earlier as chiseled in stone. In fact, it would take only a dip below 1017.50 -- just seven points below current levels -- to turn the hourly chart bearish.

Yesterday's patently spurious plunge should look more like a swoon by Wednesday mid-morning, when I expect gold will have recovered. The sell-off was very obviously caused by the nasty bull trap that ran stops placed slightly above a 1008.80 high made shortly after 4 a.m.  In a bigger picture, the _____ target given here earlier remains valid, although I should introduce another, lesser one at _____ that looks capable of showing some stopping power.  The less stopping power it displays, the more quickly and powerfully the next thrust is likely to develop.

Yesterday morning, an hour into the new trading week, we covered a small short position in the Diamonds, booking a loss of $92 on some September put options. This speculative bet, initiated on the closing bell Friday, was inspired by a hunch that if Mr. Market really wanted to catch investors with their pants down, the Tuesday after Labor Day would be a perfect time to do it. Alas, even with news that should have been helpful in catalyzing a stock-market plunge, stocks trudged higher. The news concerned consumer credit, and it could have left no doubt about the dire condition of  the American consumer. He in fact reduced his borrowing in July by a record $21.6 billion, for a seasonally adjusted 10.4% drop to $2.472 trillion. This was the sixth straight month of declines, and it would seem to cast a pall on whatever “green shoots” Mr. Obama’s spinmeisters have reported sighting lately. Because U.S. GDP is 70% consumption, rapid credit growth is the only way to keep the economy nominally afloat, let alone growing. Although this blunt fact may not have registered on traders’ tiny brains yesterday, its importance was not lost on some who frequent the Rick’s Picks chat room. One denizen pronounced the consumer credit report “absolutely stunning. Simply put,” he explained, “it is rugged, first-line evidence that there is no recovery taking place. Yet the market paid no attention.”  Indeed, the market might have shrugged off the outbreak of nuclear war just as easily. It’s a cyclical thing, of course, and stocks seem likely to remain in a “don’t-worry-be-happy” phase until the day when some piece of seemingly insignificant news causes them to plummet as they have not in recent memory. It’s Not Ignorance Mysterious cycles that we will never fully understand are at work, and

Silver's most recent peak at 16.860 fell ___ cents shy of a clear Hidden Pivot at _____, so we should assume the December contract has at least a little further to go before it hits something solid. Position traders should consider lightening up, with the goal of replacing on the pullback any shares sold near the target.  If the futures close above _____ for two consecutive days, or trade more than 10 cents above it intraday, that would be a very bullish sign going forward.

Yesterday's breakdown was serious, although I'd stipulated that DXY close for two consecutive days below 77.54 before we assume the worst. Tentatively, however, we'll look for a quick drop to at least _____, or to ______, the Hidden Pivot given here originally, if any lower. My worst case number for the period prcoeeding the G-20 meeting in Pittsburgh at month's end is ______. My hunch is that such pronounced weakness in the dollar is unlikely ahead of the meeting, but if it comes, stocks are going to fall too, and steeply.

The _____ target given here yesterday remains valid, but the bullish case for the near term was weakened by the fact that all of yesterday's action took place below the 1027.75 peak recorded on the way down a week ago. Because the plunge from that peak would have trapped many bulls, we should regard it as daunting if not impermeable.  If the futures take a stab at it today, the effort will be futile unless it exceeds the look-to-the-left peak at _____ recorded on _____.