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COMMENTARY for Monday
TODAY'S ACTION for Monday
Rick's Picks for Monday
Apologies. With anticipation of a shortable rally top at 1146.50 building to an orgiastic frenzy, I failed to see another, even more succulent, opportunity just above it at 1149.75. There’s always the possibility the downturn will come from the lower target and we’ll miss the trade, but in this case I don’t think so. Take a gander at the chart if you want to see what perfection looks like (and notice the multibar pause precisely at the ‘p’ midpoint). An 1151.25 stop-loss is advised on the trade, presumably on Monday – and let’s keep this one in the family, please, since the more widely disseminated and anticipated a target, the less likely it is to do what it ought. ______ UPDATE (2:01 p.m. EST): Ha-ha. The futures topped at 1148.00 — at an hour of the night when no one was watching anyway. This is one of those times when we must view the game with a sense of humor — so grin and bear it! And yes, the futures will return to the scene of the crime, but the 1149.75 pivot will no longer have that virginal quality that made it so appealing in the first place. If you had the initiative and imagination to have shorted in the topping range, profit-taking on half the position was/is in order, since the pullback has amounted to ten points so far. A 1048.25 stop would be logical for the rest.
The futures are showing savage power Sunday night, riding the strongest night-session surge that we can recall in a long while. At their peak, gains totaled around $25 for the session, although the futures have pulled back by $10 since and are consolidating in the early evening (EST). My minimum upside target for the near term is 1166.70, a Hidden Pivot that lies just above the so-far high at 1163.00. If the futures push above 1166.70, expect resistance at 1169.60, representing a 0.618 retracement of the correction begun from 1227.50 a little more than five weeks ago. It would take just a hair more to extend the impulse leg so that it has taken out a fourth “external” peak at 1170.20, but even without this, shorts are already dead meat as we begin the new week.
March Silver has already blown past the Fibonacci resistance noted in today’s Gold tout and looks headed for a Hidden Pivot resistance at 18.965, at least. It would take a little more than that, however — specifically, a push exceeding the 18.990 peak recorded December 4 on the way down — to refresh the bullish impulse. At that point, odds would favor a further run-up to at least 19.985, the target of a pattern (180-min) begun from 16.280 on November 3.
The dollar is getting whacked Sunday night, creating a bearish impulse leg on the 180-minute chart. The move will be just noise, however, until such time as the 77.09 low from January 5 gets taken out. Just below it, at 76.83, is another benchmark by which we might judge the power of this selloff. That’s a Hidden Pivot support, and if it’s exceeded by 0.10 or more intraday, or on a closing basis, it would imply yet more slippage as the buck struggles to consolidate.
We have a small speculative bet down in the form of two January 230 calls acquired for 1.00. Problem is, they expire on January 15, the earliest date on which an option expiration can occur, and the calls will therefore be shedding premium unless the stock rallies $6 or so per day this week. What this implies is that the calls have almost zero chance of finishing in the money, but that we still might have a chance to pare our loss if there’s a strong thrust today. Accordingly, I’ll suggest offering the calls to close for 0.15 on the opening, but for 0.26 thereafter if the order goes unfilled. _______ UPDATE: Our calls never regained consciousness, so we’ve booked a $200 trading loss.
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Take any dozen good reasons for being bearish right now and they still don’t equal the bullishness of the chart shown. The undeniably compelling rally objective is 13085, a 4.8% move from current levels, and one can only surmise that the dusting the 12158 midpoint received on the last pullback (12/28) all but clinched a finishing stroke to the higher number. Moreover, it implies that bears shouldn’t get their hopes too high even if, in the next few days, the Dow plummets 324 points to retest the midpoint support. As of now, that would signal not weakness, but a screaming opportunity to get long. Hard to believe, really, but that’s what the charts say.
This Just In... for Monday
Why is it okay for Morgan Stanley to stop making payments on five buildings in San Francisco, but immoral for a homeowner to walk away from a mortgage that is underwater? Click here for a New York Times magazine essay by Roger Lowenstein that explores this question in some depth.
Alex Scipio has created a fascinating blog, “In This Dimension,” that you can access by clicking here. If you want to know how a true hard-liner would conduct a war on terror, this is the place to find out. Here’s an excerpt:
“No valid reason exists not to use nuclear weapons on our enemies, particularly Riyadh and, if they get much closer to the nuclear club, Iran and North Korea.
“From a political standpoint, winning the war against Islamist fascism will require the general destruction and collapse of the societies that breed it, much as killing Nazism required the destruction of the society that bred it, and killing Imperial Japan required the collapse of the society that created it.”
Time to “buy the dogs” in Nigeria? Our friend, long-time subscriber and far-flung correspondent Jonathan Auerbach thinks so, with an emphasis on banks and brewers. You can reach him at Auerbach Grayson, 212 453-3575. Here’s a note from him that accompanied the firm’s most recent report on Nigeria:
From various sources we have heard that Nigerian President Yar’Adua has died; however there is no official confirmation but in fact Vice President Goodluck Jonathan has been administering the country for almost 2 months during Yar’Adua’s prolonged illness and absence. Nigeria was one of the worst performing emerging markets last year (buy the dogs?) exacerbated by margin loan problems at a number of major banks which have been dealt with decisively by the Central Bank. While the market has been up 10% in the last week (open the attachment please) we think that any media frenzy over succession, in a country where most pedestrian observers put a full stop after they deal with corruption, oil problems, and assorted chaos, could provoke volatility with a selling bias. Our view (read my notes on Nigeria from my visit last month) is that any market price weakness would be an attractive opportunity to add or initiate positions in this remarkable land. Ideas call Zoran or me. The easy calls are the surviving banks and brewers.
Hidden Pivot Webinar & Tutorials
The next Hidden Pivot Webinar will be held on Feb. 29th - Mar. 1st. This two-day event is designed to teach you the risk-averse trading strategies Rick has taken to his seminars around the world. Once you have learned his proprietary secrets, you will approach trading and investing with enough confidence to make your own decisions without having to rely on the advice of others. For more information, or to register, click here.
Recovery Is Suspect as Jobs, Wages Fall
by Rick Ackerman on January 11, 2010 12:01 am GMT · 15 comments
The gap widened last week between those who believe the economy is recovering and others who see only a deepening abyss. A report released on Friday by the Commerce Department appeared to vindicate the pessimists, at least for now: Supposedly, 85,000 more jobs vanished in December. You can be sure this number was bent, stretched and massaged vigorously to put the story in the most favorable possible light. Under the circumstances, if that’s the best the spinmeisters can do, then we can only infer that the outlook must be bleak indeed. But there may be a silver lining: From a political perspective, assuming the payroll picture gets worse before it gets better, there could be some big, and potentially constructive, changes when mid-term Congressional elections are held next fall. With just six or seven more Republicans in the House, and only a few more in the Senate, Obama’s bold attempt to remake America into a paradise for bureaucrats and leftist lawyers will likely grind to a halt. Let’s hope the Republicans are ready to seize the initiative, rather than succumbing to the temptation to gloat over what by then will be the Democrats’ steep rise and fall.
Nowhere in the story about how 85,000 jobs were lost did we find a despairing note about what this might imply for the supposed economic recovery. To the contrary, the Wall Street Journal remained steadfastly in denial with this seemingly paradoxical lead sentence: “Employers cut another 85,000 jobs last month, dashing hope of a turnaround in employment, even as the U.S. economy grows.” How’s that again? Do they mean for us to infer that the economy can keep growing with no growth in employment? As far as we’re aware, the only place where both the economy and employment are unquestionably booming is in Washington, D.C., where a reported 175,000 new jobs have been created to gear up for Obama’s Sweden-ization of the U.S. The payroll story went on to explain that the economy grew at a 5.4% clip in Q4, according to Macroecomic Advisers, a St. Louis forecasting firm. We wonder why the Journal would go to some St. Louis forecasting firm for its numbers, unless that firm is in on the fix. In any event, with jobs and real income (see chart above) both falling, and anecdotal evidence of a turnaround almost impossible to find, it’s reasonable to ask what kind of growth the Journal and the dubious forecasters it relies on are talking about. We’ll believe the economy has returned to health when we read about it at John Williams web site, Shadow Government Statistics. (Late-breaking note: Consumer credit plunged a record $17.5 billion in November – much steeper than the $5 billion drop that had been expected. The Journal et al. are already trying to spin this startling new development as a “lingering restraint” on the economy. In fact, it is evidence that economy’s collapse is about to steepen at an alarming rate.)
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