Wednesday, January 6, 2010

No guarantees in bullion today, but I'm counting on more-experienced pivoteers to supply camouflage pointers in the chat room if the February contract should trace out the path hypothesized in the chart that accompanies today's Gold tout.  The weekly tutorial session will be held as usual, starting at 9 a.m. Mountain Time.

AKAM is closing on a 27.15 target flagged here several months ago. We hold a round lot with an adjusted cost basis of 11.01, giving us a paper profit of more than $1500 at current prices. I'd suggested shorting an in-the-money call when the stock reached the target, but we'll probably do better selling something closer-to-the-money, since that will allow us to capture the "juice" of implied volatilities now in the mid-40s.  Accordingly, for each hundred shares of stock you own, short a February 29 call (UMUAK) at-the-market when AKAM gets within 10 cents of the target.  A price of about 0.95 would be a pretty decent sale, but don't try to squeeze another nickel out of this gambit if there's a chance it will cause you to miss the trade.  At the same time, buy one Feb 24 put (UMUNZ) for around 0.50.

Yesterday's funereal rally may have extended Gold's winning streak to four days, but it was quite a bit less than we might have wished for. Notice how it apexed without taking on the look-to-the-left peak recorded on December 17.  Such tired action demands that we set the bar high today, and so we shall:  at 1143.40, a crucial dime above the peak I've circled. Even so, a lesser thrust that pulls back after barely exceeding 1132.30 could yield an excellent camouflaged buying opportunity with relatively little risk.

The 1132.50 rally target posted here last week nailed yesterday's top, providing an opportunity to get short a tick off the top ahead of a piddling, 6.50-point pullback.  The futures got second wind enough to go nowhere, making a secondary high at day's end that exceeded the opening-hour spike by a single tick.  This action has become far too tiresome and coy for me,  but before it puts me to sleep let me reiterate an 1146.50 target that seems only slight less likely to be achieved than the sun is to rise yet again in the East.  This number is of course short-able with the most daringly tight stop-loss you can abide, but if you have designs on catching the perhaps more lucrative ride north, you'll have to supply the patience and the camouflage.

February Crude pushed passed a midpoint resistance at 79.02 on the weekly chart so easily that there should be little doubt as to whether it will achieve the 'D' target associated with that number at 87.20. Oil pushing toward $90 would have been seen as a major economic threat in bygone days, but we seem to have gotten so used to $70-$80 oil that perhaps it will barely provoke a discussion.

Explaining why the rampaging bear rally of 2009 is likely to fizzle this year, British journalist Ambrose Evans-Pritchard packs quite an analytical wallop into this sentence:  “The surplus regions (China, Japan, Germania, Gulf ) have not increased demand enough to compensate for belt-tightening in the deficit bloc (Anglo-sphere, Club Med, East Europe), and fiscal adrenalin is already fading in Europe.”  There are other yellow flags out as well, most significantly a contraction of M3 money in the U.S. and Europe, and a looming bond crisis in Japan.  Is Japan a hyperinflationary Weimar in the making? Evans-Pritchard thinks so. He sees the Ministry of Finance resorting desperately to printing-press money sometime next year when public debt pushes above 225 percent of GDP.  At that point the country will no longer be able to borrow at 1% from a captive bond market, notes Evans-Pritchard, and Japan will “flip from deflation to incipient hyperinflation.” The world will become obsessed with Japanese bond auctions, predicts the U.K. Telegraph’s international business editor, and “Finance Minister Hirohisa Fujii will become as familiar as a rock star.”  WSJ’s Schizophrenia  We strongly recommend that you imbibe all of Evans-Pritchard’s analysis at the Telegraph’s excellent web site, since it is densely packed with forecasts for the coming year.  Readers comments follow, a few of them inflicting heavy damage on the notion that there’s a global recovery in progress. We can understand why some would cling to this belief:  “World Factories Rebound” was the lead headline in Tuesday’s Wall Street Journal.  But this is just one more example of the schizophrenia that has characterized the Journal’s economic coverage in recent months.  The newspaper tends to do its cheerleading on the front page, but on a typical day there will be at least a dozen articles elsewhere in the paper implying there is little