September 2009

If I were short right now, wearing my pain on my sleeve, I'd have grown so despairing as to create near-certitude in the minds of contrarians that a very nasty swoon is at hand. We should therefore pay close attention to any signs of trouble -- meaning, for one, pullbacks that exceed their 'D' targets. While we're at it, and because no signs of trouble have developed yet, let's try bottom-fishing at the midpoint shown in the chart.  The trade will of course be viable only if the downtrend plays out in a fashion similar to what I have drawn.  My instructions are non-verbal, but the method you are to use should be accessible to all who have taken the Hidden Pivot course. I would encourage you to share your tactics with those in the chat room who are less adept. 

Here's another sharp rebuke to all the yo-yos who think inflation is just around the corner.  The essay amplifies Hummel's thoughts -- published here recently -- on seigniorage, explaining why hyperinflations can occur only in currency-driven systems (such as Zimbabwe's), and not in nations like the U.S., where money has effectively been replaced by credit. Click here to read the full essay.  Here's an excerpt: "I agree with Pento on every point, except for one – a devastating bout of inflation is unlikely.  In the United States, two camps of thought dominate the marketplace.  The bullish camp believes that government interventions can be fine-tuned to hold inflation in-check, while allowing the economy to expand.  The bearish camp believes that government interventions will eventually unleash uncontrollable inflation that will send the price of gold, oil, and other commodities soaring to sky-high levels – while sending the economy into a prolonged tailspin due to reduced purchasing power. "But more than likely, both camps are wrong.  And the hyperinflation expected by the bearish comp is even more unlikely than the bullish viewpoint.  Why?  Throughout the world’s financial history, there has never been a case of hyperinflation in a country using a monetary-system based on credit.  Hyperinflations only occur in countries that use currency for money.  That’s an important distinction that cannot be overlooked. "A credit-based monetary system prevents severe inflation in two ways.  (1) During times of rising inflation, investors avoid bonds in favor of hard assets.  As a result, bond prices deflate, causing great losses for existing debt holders.  (2) During times of financial stress, bonds backed by questionable assets deflate in value."

Click here for a fine rant from Roger Mason on the true state of the economy.

Writing at Politico.com, here's Jeremy Lott on the increasingly likely collapse of the Obama presidency: When he ran for president, George W. Bush promised to be a modest reformer at home and a humble representative of the United States on the world stage. The Al Qaeda-organized-and-funded terrorist attacks of eight years ago changed all that. During his presidency, Bush created massive new government bureaucracies, sent troops into two wars and threatened more as part of America’s war on terror. Barack Obama’s initial approach to the office of the presidency has been as grandiose as Bush’s was restrained. It’s not hard to recall that he ran as a transformative candidate, promising sweeping, though somewhat fuzzy, “change” during the campaign. For the first several months of his presidency, Obama has labored to deliver on that pledge. He pushed a controversial stimulus bill through Congress to help rev up the economy, turned Bush’s reluctant bailout of Chrysler and General Motors into a giant government auto buyout and appointed a record number of “czars” to help regulate bureaucracies in both public and formerly private sectors. Then, Step 2. Obama is trying to fundamentally alter the American economy by backing sweeping environmental, labor and health care legislation. He wants to change the way Americans consume energy, unionize and see their doctors. So far, he’s failing miserably. Consider the following: • Cap-and-trade legislation had to limp over the finish line in the House of Representatives with the help of a few moderate Republicans, who then caught holy unshirted hell from their constituents. Environmental legislation generally has taken a drubbing in public opinion polls when people consider how costly it is. • The Employee Free Choice Act may be stripped of its “card check” provision in the Senate, which would effectively do away with secret ballots for unionization

The Dollar Index's fall to a ______ target has been so long in coming that we should be on the alert for a reversal before it is reached. On the hourly chart, this would be signaled by a ______ print, but if ______ is touched, bears had better dive for cover.

The _____ target given here earlier will make for a juicy shorting opportunity if and when Goldman gets there, but I'm reluctant to play the upside unless we can get in at a retracement target. The best such opportunity tied to a Hidden Pivot would be down near _____, the midpoint sibling of _____.

December Silver bettered our bullish benchmark at 16.730 by a single tick yesterday, hinting of more upside to come. If so, the futures 16.850 will need to touch 16.850 today to demonstrate  their eagerness to challenge last Friday's 17.015 peak. Once above it, the futures would be an odds-on bet to reach a minimum 17.275 over the very near-term.

There's no guarantee that December Gold will follow the script I've provided in today's tout, but if it does, please consider the do-it-yourself entry strategy sketched out in the accompanying chart. Like most "camouflage trades, this one seeks to catch a short ride that could turn into something bigger. In this case, potential is to as high as 1024.90.

It's not often that we find potentially great camouflage on the hourly chart, but if December Gold moves as I have hypothesized in the accompanying chart, it will set up a beautiful entry opportunity at 'X' that seems very likely to give buyers a pleasurable ride.  I am not going to complicate my instructions by telling you how to get long in a hundred words or less, but will instead leave it up to pivoteers in the chat room to do the explaining if and when opportunity knocks Tuesday morning. _______ UPDATE (10:05 a.m.): Gold eased lower overnight, and so the entry opportunity we were looking for did not materialize.  The weakness hints of more downside to ____, or to _____ if any lower. Alternatively, an upthrust that touches _____ would put bulls back in the driver's seat.