Friday, October 9, 2009

Just a reminder that we have a score to settle with Google if and when it gets to a 553.87 target flagged here a while back. We'll almost surely use a camouflage entry to avoid pain and risk to the extent possible, so stay tuned.

The futures didn't get much lift from news yesterday of a blip-let in same-store  sales, but neither did they suffer more than a mild swoon on whatever mild twinge of disappointment bulls may have felt.  On balance, there is reason to expect a buoyant performance as the week draws to a close, although bulls may have to defend themselves on the opening. As of around 9 p.m., after-hours price action was as flat as we've seen it in recent memory, with neither side tipping its hand. The 1076.50 rally target given here earlier remains viable.

The 1074.50 target kept our confidence from wavering when gold recently came under (futile) attack. I still expect sufficient resistance at that price to warrant a position adjustment by long-term investors.  A tradable pullback  seems highly likely, and even if it is not a big one, odds are good that you will be able to replace any stock exited with shares acquired at a lower price.   If the futures trash the target, however -- and by "trash," I mean close above it the day they first hit it -- that would indicate they are gunning for a major Hidden Pivot at 1134.50 identified here yesterday.

Close but no cigar. Goldman opened on a short-squeeze gap that came within 74 cents of our target -- not close enough to get us short using the strategy that was recommended. We'll set the trade aside, but I should mention that anyone who was  long coming in yesterday might have used what I call a "dynamic trailing stop,"  keeping risk and reward in a 1:3 ratio at all times. This means that when the stock came within 74 cents of the target, an implied trailing equal to a third of that, or 25 cents, would have been in effect. I read it as moderately bearish that Goldman fell so hard without having achieved the target. Since the stock is a key bellwether for the market as a whole, we'll need to monitor its further progress/regress closely.

We’ve had a rollicking good time in the Rick’s Picks forum lately as inflationists sought to rise to the level of debate in explaining why deflation is unlikely. You can judge for yourself how well they succeeded by clicking here, but on our scorecard, at least, they didn’t win a round. How could they have when they are evidently blind to evidence that the global engine is perilously close to being suffocated by deflation? As always, there were quite a few beleaguered consumers ready to testify that they are getting hammered by rising grocery prices. One of them is a friend of ours who lives in an L.A.-area home that has lost a third of its value in the last three years. That translates to about $400,000 – and yet, it is the seven percent increase in his sewer bill that seems to be bothering him most. He’s not the only one who has remained oblivious to mounting evidence of deflation nearly everywhere: falling home prices, falling wages, falling rents, falling consumer credit, falling bank lending, a devastating collapse in financial assets, massive cutbacks in state and local budgets, the absence of pricing power for most consumer goods, etc.. Some might argue that the price of health insurance and college tuition have been hanging tough.  Oh really? We see health care moving toward triage and rationing because it has become manifestly unaffordable for businesses and individuals alike. Under the circumstances, how much more medical inflation can we expect? Or do you buy the wildly popular, albeit counterintuitive, idea that “The Government” will somehow be able to afford for us what we can barely afford for ourselves?   Cutthroat Colleges? Regarding college tuitions, we are on record with a prediction that the Ivies and top private schools will be going for each other’s throats