It’s a crazy world that views dollars and Treasury paper, of all things, as a safe haven whenever the financial news turns unsettling. Yesterday’s upsetting story had sales of existing homes falling by 2.7% last month, darkening the mirage of recovery in the housing sector. Home sales had risen over the four previous months, but the distress buying that was driving this statistic appears to be drying up. Skittish traders lost no time connecting the dots, dumping gold and piling into dollar assets. They evidently had » Read the full article
Yesterday’s inebriated swan dive came within two ticks of a two-day downtrend’s Day-Glo target (1040.50) on the hourly chart. The futures should go no lower than that Hidden Pivot if bulls are to maintain the appearance of being in charge. However, if they do breach the support decisively, I’d put pivotry aside and use the 1025.50 low from August 13 as a minimum downside objective. Alternatively, a print at 1050.00 Thursday night or early Friday morning would turn the one-minute chart bullish. ______ UPDATE (11:40 a.m.): The day so far has been spent playing Hidden Pivot toe-sies, with a high at 1049.50 and a low at 1039.75. Don’t expect much more today.
The corrective rally Thursday night promised to deliver no more than 1000.10 — and that was only if the Hidden Pivot’s midpoint sibling at 997.30 is exceeded. Promises sometimes get broken, though, and we should take it as a bullish sign if it happens here. However, it would take nothing less than 1009.40 to turn the lesser intraday charts decisively bullish. If we study Thursday’s tumult from the top of the 5-minute chart on down, we find a Hidden Pivot at 976.10 that can serve as a worst-case target for the near term. And as always, price action at the (988.80) midpoint pivot will tell us whether our coordinates are the right ones. _______ UPDATE (11:44 a.m.): The futures have closely followed our script, topping in the wee hours at 1000.50, four ticks above where predicted. The subsequent breach to the downside of the 988.80 support is a bearish sign for the near term, but it would be counteracted by a print at 1001.70.
Applying Lindsay’s rules straightforwardly, December Silver is entitled to a pullback into the range 15.120-16.645 before it embarks on another leg up. The resumption of the bullish trend would be signaled by a booster-stage rally of at least $1.05 starting from anywhere within the given range. The potential for the move, measured from the low, would be $2.16
Subscribers are working two bullish calendar spreads (x16), but I would suggest increasing the size of the position if TLT corrects down to the 115.18 target shown. For now , we are long September 20 118 calls against short August 19 118 calls that we will roll into August 29 calls this Thursday and Friday. We’ve already done the roll twice, reducing the cost basis of the spread to 0.04. This week’s roll will entail covering (buying back) the short calls and shorting a like number of August 29 calls, effectively selling the August 22 118/August 29 118 calendar spread.
It was marked on Tuesday at 0.17, off a 0.26 offer, but any price higher than 0.04 will effectively turn the position we’ll have – long the Sept 20 118/August 29 118 calendar — into a credit spread. This means we can’t lose – will make a profit no matter what TLT does. Ideally, come September 20 , TLT will be sitting at 118, our spread will be trading for around 0.50, and we’ll be carrying it for a credit of perhaps 0.50. The imputed profit would be $1600 — not bad, considering our risk is already close to zero.
My long-term outlook for T-Bonds is very bullish, a view that goes sharply against a consensus which clings to the belief that interest rates – and the stock market — can only go up. That is a bet we should be eager to fade. We may have a chance to do so at still better odds if T-Bonds continue to sell off on the manufactured idea that the Jackson Hole conference will open the floodgates for more stimulus and inflation.
Goldman’s clawback propensity yesterday was fearsome, especially when you consider how very badly the stock needs to correct a 15-day run. If it pokes its greasy little snout above 185.60 today, bears had better be prepared to throw in the towel.
Relief may be near in the form of a Hidden Pivot support at 389.22, but it would be bearish, at least for the short term, if that number fails to hold.