January 2010

With punk earnings from Alcoa as an excuse, it should have been a piece of cake for DaBoyz to execute a vicious shakedown yesterday. Instead, valiant sellers struggled for yardage with the Dow down barely 100 points but gained only tough inches.  With nowhere else to go, the averages swung around, recouping more than half  the day's losses by the bell.  They were presumably in good position to  put the squeeze on bears yet one more time on Wednesday.  If that happens and you hanker to play, I've sketched out a path of excellent camouflage for you to follow in the accompanying chart.

March Silver should be presumed bound for at least 18.120, a Hidden Pivot support, but any lower would put its 'D' sibling in play: 17.890.  Both numbers can be bottom-fished with a stop-loss as tight as three ticks, but because the futures fell so steeply yesterday, I wouldn't advise getting in front of the move too aggressively. Alternatively, it would take a pop today exceeding 18.495 to turn the 5-minute chart bullish.

Yesterday's fright-wig plunge didn't even qualify as impulsive on the hourly chart. The reason is somewhat technical, and I've attempted to explain why in the accompanying chart. However, the fact that sellers failed to do their worst is no reason to celebrate, since they could easily return today in greater numbers to finish the job.  There are two Hidden Pivot supports below that we can monitor to get a sense of how determined the sellers are: the first lies at 1117.60; the second, its 'D' sibling, at 1102.80. The lower support looks like a more conservative play for bottom-fishing, since the higher number coincides with a bunch of lows recorded a week ago.  Alternatively, the most bullish thing I could see happening over the near term would be an upthrust touching 1138.80.  That would create a bullish impulse leg on the very lesser charts, and with it the possibility of some base-building into week's end.

Although the Boulder, Colorado area where we live has been spared the Great Recession’s worst ravages so far, an unprecedented number of local businesses have nonetheless gone under in the last year or so. We’ve grown used to seeing our favorite restaurants fail one by one, and we’ve even accepted the likelihood that only a relative handful of independent restaurants and retailers will survive these hard times. But Sam’s Club!?  We’d thought the warehouse club’s sales would remain rock-solid in hard times, but apparently not. Yesterday, the parent company, Wal-Mart, announced it’s shutting down the Louisville, Colorado Sam’s Club on January 22, along with nine other stores located elsewhere in the country. Like so many other local businesses that have failed in recent months, there often appeared to be enough shoppers in this particular Sam’s Club to keep things going until the economy improves. Apparently not, however.  The store was losing money, according to a company spokesman, and there’s no way it can remain open under the circumstances. 128 workers will be affected, although Wal-Mart has promised to try and relocate them to other Sam’s Clubs in Colorado. Binging Is Dead The store itself occupies a 127,000-square foot building situated between a Kohl’s department store and an Albertson’s. What will become of this huge space?  It’s hard to imagine, since few retailers generate the kind of sales it takes to pay the rent on a 127,000-square foot building.  The same problem is likely to crop up in hundreds of towns across America:  How will they recycle big-box stores when they go dark? The answer to this question, assuming there is one, suggests that America’s emergence from deep recession will not happen quickly. Ours is an economy than runs on consumption, after all, and it may be many, many years before

Gold and the Mini-Indexes were both acting pretty coy Monday night, but I've sketched out a bottom-fishing possibility in the Mini-S&P that may work for night owls if the futures feint lower in the wee hours.

A moderately important rally target at 107.58 is not likely to produce the Mother of All Tops, but it does look like a high-odds shorting opportunity because of its subtlety and the single-bar delicacy of its ABC coordinates (180m, A=97.94, 11/04; B=103.62, 11/11).   Accordingly, I'll recommend buying two February 107 puts (DIANC) if and when the target is closely approached.  A rough estimate of their value with the underlying at 107.58 is 1.80.  I did not use a calculator to come up with that number, by the way;  rather, I took the current, 1.93 bid for the February 106 puts and reduced it by 12 cents, based on delta value of 0.45 and a 30-cent rally to 106.58. _______ UPDATE:  The Diamonds plunged at the opening bell, so our short went unfilled.

DXY overshot a 76.91 support by 0.12 points -- probably enough for us to infer that still lower prices impend. However, the short-term bearish outlook would be diminished, though not negated, by a morning thrust exceeding 77.51 to the upside. That would create a bullish impulse leg on the hourly chart, setting up a possible reversal of the corrective forces that have dominated since just before Christmas.

Silver's pullback has been impressively shallow so far, considering the steep pitch of the rally over the last five days. A minor midpoint support lies at 18.485, but if it's breached, brace for more corrective action over the near term down to as low as 18.290. Alternatively, a renewed surge today that exceeds 18.990 would be extremely bullish.  You can look for a camouflage entry opportunity if there's a pullback from within 2-5 ticks above that threshold.

So that it can be found archived in the touts section, let me repeat the outlook for February Gold discussed in today's commentary:  To keep shorts on the defensive, the futures will need to push on, taking out the fifth peak at 1170.20 shown in the chart.  A vigorous effort should take no more than one or two days to succeed, and we should expect no less if bulls are to tackle the all-time high at 1227.50 with overwhelming power.  To put it another way, the ease with which the futures get past 1170.20 is likely to be predictive of how easily they surmount resistance at 1227.50.