Monday, December 14, 2009

These are interesting times, for sure -- nowhere moreso, unfortunately, than on Capitol Hill. A trillion dollar health bill appears destined to be excreted by Congress before New Years, despite the fact that 57% of Americans (and growing) staunchly oppose it. As recently as last week, it looked as though Joe Lieberman, the Senate’s lone independent, would put the kibosh on this whopping legislative turd when he issued an “over-my-dead-body” statement in opposition to the plan’s “public option.” Lo, there was Lieberman on the Senate floor Saturday afternoon, providing the 60th vote the Democrats needed to overcome a Republican filibuster.  Because Lieberman does not drive on the Sabbath, he’d walked to the Rotunda after morning services at his Georgetown synagogue 3-1/2 miles away. Couldn’t he at least have waited until Monday to betray his supposed principles and sell out most of those who elected him?  What amazes most about the health care bill is how it just keeps coming, like some sci-fi dreadnaught that is impervious to bullets, flames and bombs. The bill most surely is impervious to the barrage of negative newspaper articles that have tried to explain, in language that even the village idiot could understand, why this is probably the worst piece of legislation to come out of Congress since the founding of the Republic.  Reid’s Triumph of the Will  The villain of this saga, Sen. Harry Reid, is very much in the driver’s seat. He has earned our grudging respect for being able to push through Congress a political Trojan horse that has the potential to complete Big Governnment’s subjugation of the free-enterprise system under the New Deal. The fact that the plan would be colossally wasteful and that it would benefit only a small minority of Americans while making health care significantly more expensive for everyone

The rally pattern shown in the accompanying chart looks promising for a short at 105.86.  The C-D leg has been a tedious grind relative to the quick ABC, but it doesn't alter the logic or the odds of the 105.86 target eventually being reached. Officially we'll buy two January 106 puts (DIAMB), stop 106.01.

Friday's rally showed a faint yellow streak when it failed to take on a key high at 76.82 recorded on November 3.  That wouldn't be much of a feat if it happens today, as I expect it will, but the fact that the rally didn't achieve the benchmark on the first attempt argues against the likelihood that we are witnessing the beginning of a bull market in the dollar.

Friday's predicted snoozefest appears to be carrying into Sunday night.  This is not weakness, just inertia while DaBoyz await the next "news"-driven opportunity to grab shorts by their scrota.

We're using a Hidden Pivot at 1090.20 as our minimum retracement target for the near term, although a close look at the hourly chart reveals another at 1094.30 from which the futures could conceivably turn higher.  Either way, the February contract is likely to correct a further 1.8% or so before it would becoming an enticing buy.  Alternatively, buyers would need to push the futures up to 1154.60 today to stampede bears and end this so-far 9.5% correction. _______ UPDATE:  If Gold has bottomed and will not require a pullback to 1090, we needn't wait for an 1154.60 print to turn bullish.  Stay tuned to the chat room for camouflage entry opportunities.

Correction targets for March Silver equivalent to the ones I've provided for February Gold lie, respectively, at 16.450; or if any lower, at 16.390.  Bulls could turn things around decisively, however, and send bears into a short-squeeze panic, with a print today at 18.055.

Two Hidden Pivots beckon above -- 1148.25 and 1162.00 -- but it's futile to try and guess when the implied breakout will come.  It will almost surely happen sometime between now and New Year's Eve,  but  I'd don't see much value in speculating as to exactly when.  If you're patient enough to watch the 15-minute chart all day long, every day, however, I suspect that it will provide decent camouflage to get long with the uptrend.  One such opportunity, with very low risk attached to it, was developing  at the closing bell on Friday.  I've included a chart that shows how it would unfold ideally. _______ UPDATE (10:37 a.m.):  Someone in the chat room asked, What's up with Rick's ES touts? Wasn't I bearish before?  I still am, but not so bearish that I can't see the broad averages making marginal new highs into Christmas.  My 1148 forecast for ES allows for that, but it hardly classifies me as a bull.  I was  slow to come around because I'd failed to think through the logic of my Goldman-as-bellwether idea.  I had doubted stocks could go significantly higher without the fraudulent bank-recovery story to catalyze buying.  I was wrong.  With or without a bank story, the institutional lemmings, with more OPM than they know what to do with, have no choice but to continue to buy up stocks till the year's end.