Wednesday, December 16, 2009

The lessons of a dull day were everywhere to be found: dueling impulse legs, tick-chart trades and microtrend analysis that said little or nothing. Still, these conditions represent the occasional condition of the real world, and so it can be instructive to ponder charts that yield almost no useful information, even when viewed with a magnifying class. What we did find was that the GLD charts provides a useful proxy for gold futures that cuts through the confusion. We settled on an upper and lower threshold that should put all anxieties over bullion’s next move to rest.

Downside targets given yesterday for Goldman and Citi were dead-center bullseyes, but the broad averages will have to open strong to pull the bank stocks along following overnight news that Abu Dhabi wants to renege on a dumb stock-purchase agreement it made with Citi.

The futures are waiting for news capable of provoking a short-squeeze to 1132.50, the nearest Hidden Pivot above of significance.  Be prepared to be bored to tears first as ES marks time near 1106.50, the midpoint sibling of our target.

The 162.11 Hidden Pivot where I suggested bottom-fishing in the chat room yesterday nailed the intraday low precisely to-the-tick.  Because the subsequent bounce carried 55 cents, anyone who took the trade would have had an easy opportunity to exit with a partial profit.  If you still hold stock, I'd suggest a 162.28 stop-loss, switched to a 30-cent trailing stop when 162.85 is hit. Minimum objective:  163.10.  (FYI, here is the heads-up I gave in the chat room wth the stock selling around 162.80 and falling:  "GS looks like it will bottom -- tradably -- at 162.11. The target...looks every bit as promising as the one given in Citi." ) _____ UPDATE (2:09 p.m. EST):  The stock has traded as high as 165.19 today, so anyone who took a position overnight after having bought at the targeted low, 162.11,could have reaped gains of as much as $308 per round lot.  You're on your own now, but please note that Goldman could be signaling more upside to as high as 169.33 if it closes above a midpoint resistance at 165.72.

Use a Hidden Pivot resistance at 77.96 as a minium rally target for now. It will remain valid as long as 76.64  has not been exceeded to the downside.  If the futures stall for a day or longer, the battle between bulls and bears will like center on 77.30, the mipoint sibling of the target.

The futures spent most of the day oscillating around an 1124.90 midpoint whose 'D' sibling lies at 1133.00. We'll make that our minimum upside projection for today while noting that that's not asking too terribly much of February Gold. An 1154.50 benchmark remains viable as the point at which we may infer bullion's corrective phase is over.  It would take somewhat less than that, however -- specifically, a print exceeding 1143.40 -- to invalidate the 1090.20 target that is still our minimum correction target.

We bought 800 shares yesterday pennies off the intraday low, but because this was a Pick of the Day that may have attracted the interest of relatively inexperienced traders, I am not entirely comfortable about having gotten aboard in the final hour of the session.  We'll play the hand we were dealt nonetheless, sticking to a 3.49 stop-loss and a 3.77 offer for half of what we  acquired.  The stock looked to be basing after we boarded, but there is no predicting whether the fragile low at 3.51 will survive a change of mood come morning.  There was news Tuesday night concerning a stock-purchase deal with Abu Dhabi apparently gone bad, but it's hard to guess how this will effect Citi at the bell, since the bullish implications of the deal had been ignored to begin with. _______ UPDATE (2:04 p.m. EST):  Citi has spent the morning boring bulls and bears alike half to death. We stuck to our discipline nonetheless, exiting on a stop-loss at 3.49 for a $4o trading loss.

Can you think of anyone other than CNBC’s talking heads who’s bullish on the economy, bullish on the banking system, and bullish on real estate?  Nor could we after brainstorming the question with radio host Al Korelin yesterday.  We had just taped a update on gold for the Korelin Economics Report when our host asked whether we knew any full-throated optimists who could hold their own in a radio interview. The weekend show was becoming too gloomy, Korelin said, because it’s so difficult these days to find guests who think the economy is really and truly on the upswing.  Korelin’s hugely popular radio show reaches 260 stations, and as you can imagine, his Rolodex is filled with many hundreds of names of especially opinionated people. But genuine, hard-core bulls willing to embrace the sunny side?  Searching the Rolodex, he had come up empty. And the only guy we could think to recommend was Mr. Happy-Talk himself, Larry Kudlow.     Surely there must be someone else? Unfortunately, in the newsletter world where we dwell professionally, we couldn’t think of a single, unmitigated  bull among the scores of gurus with whom we swap newsletters. In fact, although we’re pretty sure ourselves that the U.S. economy is slipping into a Second Great Depression, that kind of thinking places us only around the statistical middle of the pack among professional gloom-and-doomers. And compared to, say, a Nostradamian in the group who foresees two World Wars and an unimaginably powerful series of earthquakes that will turn Flagstaff, Arizona into a coastal town and split the Dome of the Rock, our own view of the world seems positively buoyant.  Are We Too Pessimistic?  So, no, we told Korelin, we can’t think of anyone besides Kudlow to take the other side. But having said this, we wondered aloud