February 2010

For night owls, a midpoint support at 16.110 looks compelling as a place to try bottom-fishing.  This Hidden Pivot is equivalent to the one noted in today's gold tout, and it comes with the same caveat. A decisive breach would imply more immediate downside to as low as 15.920.  Alternatively, it would take a pop today above 16.970 to turn the hourly chart into a cannon. ______ UPDATE (10:46 a.m.EST): Support at 16.110 proved neither precise nor durable, although the pivot was central to an overnight distribution that took two hours to play out.  The relapse has sent the futures down to as low as 15.785 so far this morning, bringing into focus a 15.415 target.  On a 180-minute chart, that is the midpoint support associated with A=16.950  (Feb 3).

Gold looks so comfortable going bouncy-bouncy off $1100 that one might think its bullion-banker enemies had gone quiet for the moment. An 1148.70 rally target given here earlier remains viable, but if the move doesn't come soon -- say, within the next day or two -- buyers may need to pull back below 1098.10 (aka point 'C') to develop thrust. Night owls can try bottom-fishing at 1109.50 with a very tight stop-loss, but this midpoint support looks a tad too close to Monday's low to be considered a high-confidence support. A breach would imply more downside to 1101.60.  _______ UPDATE (10:40 a.m. EST): The futures are in a so-far weak bounce after sinking overnight to 1101.50, a dime from our target.

Here’s a fine example of unintentional irony, from atop the front page of Monday’s Wall Street Journal:  “Debt Deals Haunt Europe”.  And the sub-heading: “Investors Re-Examine Complex Financial Maneuvers Used to Hide Borrowings”. As you might expect, the story was all about Greece and the so-called PIIGS – Portugal, Ireland, Italy and Spain. But it could just as easily have been written about the U.S. or a dozen other large countries that have somehow retained their AAA credit ratings despite having borrowed sums too large to ever repay.  And let's not overlook the fact that there are a few U.S. states – California, New York and New Jersey spring to mind – whose exposure to debt makes Greece’s look like chump change. The elephantine subtext of the Journal story is that Europe’s debt woes are intertwined with those of the U.S., and that, moreover, if one or the other sovereignty were to fall, Asia would fall too. Financially speaking, the world is wearing a bomb belt that could detonate at the slightest misstep.  Think about it. If just one company, American insurance giant AIG, came close to toppling the global financial system – which it did -- imagine how a sovereign failure might play out.  Let’s start with poor, picked-on Greece. The country is on life support, its ability to borrow sustained by Germany’s full faith and credit. But guess which country’s financial system would be next to unravel if Germany’s commitment (or its ability) to “save” all of Europe falters?  Answer: France, whose banks hold 80 billion euros in Greek debt. That’s twice the amount held by Germany, so you can understand why the EU’s supposed backing of Greece is one-country deep and a thousand spin doctors wide. [For a superb global perspective on Europe’s problems, we recommend the

Think Europe's PIGS -- Portugal, Ireland, Italy, Greece an Spain -- are in trouble?  Seven U.S. states appear to be heading for troubles that are even worse. Click here   for the full story at SeekingAlpha.com.  Here's an excerpt:  "The seven states to make my list are California, Florida, Illinois, Ohio, Michigan, North Carolina, and New Jersey. Each has a population above 8 million people. Each has had to borrow more than a billion dollars, so far, to pay claims out of their now bankrupt unemployment insurance fund. Also, each state currently registers broad, underemployment above 15% as indicated by the U-6 measure for the States. And finally, each state is a large net importer of either oil, natural gas, electricity, or all three of these energy sources."

As the hourly chart (see inset) shows, an upthrust exceeding 424.17 today would be just the thing to re-energize the so-far corrective rally from 363. HUI is already on track to hit 434.25, provided it doesn't dip below 406.75 first and it can get past 420.50, the target's midpoint sibling.  Please note as well that last week's top occurred almost precisely at the halfway point of the decline  from January 11's high.  This suggests that we should look for resistance at 432.51, the 0.618 line, in addition to the expected pullback from 434.25.

For lack of ugly news, bears were getting no respite Sunday night.  A short-squeeze on the opening seemed almost too pat to be credible, but even so, I am not encouraging anyone to get in its way.  Actually, if the Industrial Average trashes a midpoint resistance ay 10429 -- the high on Friday was  10421 -- it would be unstoppable below 10478. That number is a short, but tie it to a tight stop.

We hold seven April 42 puts for an average 1.05, and a March 44 put for 0.23. If the QQQs are selling for 45.19 or higher ten minutes before the close, exit the position at-the-market.

After having missed an 81.56 rally target by just 0.22 points, the Dollar Index has plunged by nearly a full point. The pullback would become bearishly impulsive on the hourly chart if it hits 80.18 today, but there's no point drawing any conclusions until that happens.  The decline has already exceeded 50% of the rally from last Wednesday's low, but support at 80.24, where 0.618 Fibo line comes into play, remains to be tested.

A Hidden Pivot resistance at 16.795 is equivalent to the 1148.70 target given today for April Gold. Its midpoint sibling lies at 16.235, and so a pullback to that number, if it comes,  could be the best buying opportunity ahead of the push. Keep in  mind that the rally would need to go somewhat higher, surpassing a key peak at 16.950 recorded on February 3, to refresh the bull trend on the hourly chart.