Wednesday, February 3, 2010

A note from a long-time subscriber, a cautionary note concerning the heavy dilution of mining penny stocks: "I just got back from my yearly trip to Vancouver to attend junior mining conferences and presentations, and the one thing that really stuck out was the amount of financing that occurred at sub 10-cent levels. Billions of shares were issued in Q4 and Q4 2009 to keep companies afloat and move their projects along. A lot of this paper will begin to trade freely in the next six to eight weeks. I have one junior that has 143 million shares coming off escrow, with free trading to begin next week (float is 332 mm shares) of shares financed at 0.28 cents CDN$. The stock is 0.65$. There are hundreds of these situations right now. For people who do not trade juniors often, this set-up and the potential sell-off could turn into a real "learning' experience."  I saw John Kaiser speak at a workshop on Jan 18 on this topic and the magnitude of this issue is much larger than I have ever seen before. Just thought you might be interested. "

Yesterday's rally was NOT impulsive on the hourly chart, having turned chicken-hearted just shy of a one-off peak at 1101.75 recorded last Thursday.  It may seem paradoxical to infer that the futures are demonstrating their weakness with each new upthrust, but that's the way it looks to me.  My recommendation is to short this chazzerai  each and every time you get a chance, using micro-tight stops above the respective 'p' midpoints and 'd' rally targets.

AKAM's sharp rally has put our goal of shorting February 21 puts for 0.35 out of reach, so cancel the order for now. We continue to hold a round lot with a cost basis of 11.01, offset slightly by a February 24 put acquired for 0.35, and a February 29 call shorted for 0.60.

Because the futures seem to be having little difficulty impulsing on the daily chart with each new thrust, savaging midpoint resistance points along the way, we should assume that an 81.20 rally target on the daily chart will soon be achieved. The move would be subject to resistance at 80.46, the 'D' target of a lesser pattern; and on a feint lower, to speculatively buyable support near 78.97, the midpoint of the larger pattern. _______  UPDATE:  The futures finished moderately higher after bottoming below our support overnight.

I asked Doug "Harry" McLagan to try his hand at touting, and he has kindly obliged with some keenly reasoned set-ups in the March Ten-Year T-Note and March Yen.  Night owls please note:   Gold was getting hit Tuesday night, but not so badly that we shouldn't attempt to bottom-fish at the 'D' target of the minor retracement pattern shown in the chart accompanying Wednesday's tout.

Around 11:30 p.m. EST, the futures were breaking down below the 1112.80 midpoint shown in the chart. This suggests more slippage to as low as 1110.10, its 'D'  sibling.  Night owls can try bottom-fishing at the lower support, stop 1109.20.  Be frugal if the expected rally from our target gives you the chance to substitute a trailing stop for the initial one, since it could be a painful drop if sellers take out the obvious supports.

The daily chart is persuasively bearish, having tripped a conventional short entry on Friday at 1.1028. Moreover, and adding to a picture of short-term weakness, is the fact that no rally since then has exceeded any prior peaks even on the lowly 5-minute chart.  So how do we get short with the least amount of risk? My suggestion would be to wait until the futures break below the 1.1031  midpoint support shown in the chart.  Thereafter, you should look on the 1- and 3-minute charts either for entry with-the-trend at Lindsay's point 'X'; or at the 'p' midpoint or 'd' target of a minor retracement rally. I've sketched the first idea in the accompanying chart. ______ UPDATE (10:15 a.m. EST):  The chart foretold this morning's price action almost exactly, and the hypothetical trade illustrated would have been a solid winner.  The CME shows a plunge moments ago to 1.0968 that could be a misprint, but in any event, the futures appeared to have traded down to at least 1.0995 after tripping a short-entry signal at 1.1021. (3-min chart, A=1.1041, B=1.1005, and C=1.1030).

Rally patterns on both the daily and hourly charts yield some potential opportunities to get short with relatively little risk. Most immediately, there's a midpoint resistance on the hourly at 118^06.5 that can be shorted via a 118^05.5 offer, stop 118^07.5.  Above it, perhaps more speculatively, you could short either 118^19.5 or 118^24 with a stop-loss sized to your taste and cognizant of important prior highs on the daily chart.  Upside breakouts in either case could lead to volatile action. The highest target immediately available lies at 119^31, but it is not in play just yet.  Pivoteers may be interested in the coordinates used to calculate the targets and midpoints given above. For the daily chart:  A 115^18 // B 118^09 // C 117^08 // P 118^19.5 // D 119^31; and for the hourly: A 117^11 // B 118^14 // C 117^21 // P 118^06.5 // D 118^24. _______ UPDATE:  The futures headed lower out of the gate, negating our plan.

Yesterday’s rally on Wall Street added a few extra ounces of credibility to a buying binge that we’d initially regarded as mere noise in a newly re-energized bear market. That could still prove to be the case, although we are close to giving bulls the benefit of the doubt for the moment. The hourly chart below shows why.  Tuesday’s binge began with a leap at the opening bell, and buyers never looked back. The result was a thrust that surpassed four prior peaks without pausing for breath. Since we require merely a two-peak breakout on the hourly chart to signal a potentially meaningful trend change, we might infer that this rally has the potential to go a ways. Will it be just a 400-meter sprint, ending soon in exhaustion?  Or are buyers perhaps warming up for a 5000-meter run to new recovery highs? If the Dow is indeed bent on challenging mid-January’s peaks some 500 points above these levels, we should expect to see a strong follow-through today, with a gain at some point during the session of at least 136 points.  That would push the Industrial Average above the small peak at 10433 shown in the chart, refreshing the bullish trend in the process. According to the proprietary Hidden Pivot Method that we use to trade and forecast stocks and commodities, the best evidence of a strong and durable trend is one that surpasses an old peak with each new thrust.  That is why we’ll be monitoring DJIA 10433 today.  Ordinarily, we would use Hidden Pivot targets to gauge the strength of any rally.  In this case, however, two numbers used in more traditional forms of technical analysis may be more helpful:  10387.24, and 10468.08.  These resistance points represent, respectively, a 50% retracement of the decline from January 19’s