February 2010

I'll be in Mexico City this week with Al Korelin and his entourage, looking at mining properties owned by Vancouver-based Aurcana Corp. In my absence, Doug "Harry" McLagan will be calling the shots, posting touts each night and updating intraday. I'll be looking in on things from time to time so that Harry won't have to fly solo for four days, and I will also try to put out a report on Aurcana while I'm gone. Have a profitable week!

Here's an interesting note from our friend Bob Hoye, who thinks the Fed's ability to depreciate the dollar is about to be curtailed by global "bond vigilantes" : "Too many generations of demented central bankers have fostered an unintended growth industry – a sector that gets its revenues from an endless drumbeat that the dollar will be driven to zero in another version of a Weimar inflation. "Our view on this ghastly prospect has always been that in the 1920s Germany had an almost negligible credit market and had to use a real printing press to deliberately debase the mark. The US is the senior credit market and, quite simply, global "Bond Vigilantes" are getting close to shutting down the abilities of the Fed to depreciate the dollar. "The Fed needs speculators in soaring asset prices to expand its own portion of the global credit market. Later in the year, most asset classes could be falling in price, which will curb, if not prevent, the Fed's nihilistic compulsions. "Instead of market forces repudiating the dollar, financial history will likely repudiate the financial adventurers who have been "managing" interest rates and the dollar. In the meantime, the gold sector is expected to record outstanding performance through this year."

Shortly before 3 a.m., DaBoyz had thus far resisted the opportunity to pop index futures above their late-afternoon  highs. It will probably take negative news overnight to cause shorts to recede from Thursday's mildly panicky mood, but they looked to be sufficiently nervous to set a buoyant tone for Friday's opening.  If so, the E-Mini S&P target should work nicely as a minimum upside target.

A Hidden Pivot resistance at 10266 appears likely to end the Indoos' pathetic show of bravado, which began a week ago from 9835.  That's if the rally doesn't terminate at some lower level -- a possibility that would be signaled by choppy incertitude in the first hour or so of today's session. An early dip to 10114 should be regarded as a buying opportunity, since that's the Hidden Pivot midpoint associated with the target. _______  UPDATE:  The Indoos gapped through the 10114 support on the opening bar, negating the trade but also telegraphing the further weakness that has ensued.

As of around 2 a.m., the futures had come within two ticks of the 1080.25 rally target flagged here yesterday. If they get short-squeezed above it -- a good bet, I would say -- look for the rally to continue to at least 1092.50.  There were  no good handholds for a camouflage entry on the lesser charts, but I wouldn't recommend using a breakout above 1080.25 instead, since you're bound to have plenty of company. ______ UPDATE(11:27 a.m. EST):  The futures' chicken-hearted confrontation with the 1080.25 pivot last night proved telling, since the index has been down by almost 17 points this morning. DaBoyz are attempting to squeeze shorts at this moment, but I doubt they'll be able to wring much mileage out of them.  You can short 1069.50, stop 1070.25, if the opportunity should arise. _______ FURTHER UPDATE (11:35 a.m.):  Cancel the short offer, since the futures are selling down hard from a 1067.75 high. The target remains valid nonetheless, but we should have preferred to short it on the first trip up.

In the chat room Thursday morning, our friend and astute metals trader Andy Maguire weighed in with the observation that J.P. Morgan, among others, was covering Silver shorts near last week's lows, implying little downside risk from here.  Assuming the March contract follows the same trajectory today as April Gold, we should look for a rally to as high as 16.070.  Pivoteers should look for a camouflaged buying opportunity if the futures dip to 15.570 before taking off. That is the Hidden Pivot midpoint associated with the rally target. The futures have already been down there once, bouncing from 15.565, a single tick from the support, so if they return to the scene, odds won't be quite as favorable for buyers the second time. _____ UPDATE:  Like Gold, Silver was having an inside day as of 11 a.m.  The futures had retreated sharply after marginally exceeding Thursday's intraday high, but bears were not having much success trying to take out yesterday's 15.175 low. ______ FURTHER UPDATE (12:30 p.m. EST, Feb 16): Silver has reached and surpassed the 16.070 target, thus completing the pattern.

A 1102.40 target disseminated in the chat room Thursday is still viable, but any progress above it would be telegraphing more strength. If this occurs, however, the futures would need to continue up to 1106.90 to refresh the bullish impulse on the hourly chart.  This booster rally would be most powerful if it has traversed the range  1098.50 - 1106.90 without a discernible pause on the hourly chart.  Alternatively, a downtrend could be expected to reach a minimum 1057.40. That Hidden Pivot could be bottom-fished with a 0.50-point stop-loss, provided 1098.40 has not been exceeded to the upside first. ______ UPDATE (10:41 a.m. EST):  A run-up in the Dollar Index to within o.03 points of an important HP resistance has put pressure on Gold this morning, but the futures are still having a technically meaningless inside day so far.  FYI, they'd need to pop above 1148.00 to turn the daily chart bullish.

We’ve got some explaining to do, since some readers evidently took yesterday’s commentary – “A Cautious Bernanke Finally Gets It Right” -- as a paean to the Fed chairman. In fact, we feel quite strongly that America and the rest of the world would be much better off if he’d renounce his role as a policymaker and return to Princeton, there to pursue the harmless, bumbling life of a tenured professor. We’ll come back to Mr. Bernanke in a moment, but let us first mention pianist Joanne Brackeen and Breath of Brazil, a brilliant jazz album released in 1991 that ranks right up there with Bill Evans’ best ensemble work. We first heard Brackeen on a album she did with Toots Thielemans, the peerless harmonica virtuoso. We mentioned her here a couple of weeks ago, but we do so again to drive home the point that she is simply incredible.  In the album she did with Toots, her style was a little agitated on some of the tracks but amazingly inventive. In Breath of Brazil, she shows a beautifully relaxed, lyrical style, but with a rhythmic intensity that marks her as one of the foremost interpreters of Brazilian music outside of Brazil. To those readers who enjoy piano jazz, we cannot recommend this album highly enough. It features standards from Jobim, Sergio Mendes, Ivan Lins and other greats. Joanne Brackeen is not particularly well known, but she deserves the widest possible audience.  Although Breath of Brazil is out of print, the digital tracks are available at Amazon and elsewhere on the web. You can sample them by clicking on the link above, or here. No ‘Cure’ for Deflation Returning to Mr. Bernanke, when we wrote here yesterday that he had “finally gotten it right,” we didn’t mean to imply that

How much more excitement like yesterday's can we take? The E-Minis were pretending to get revved up Wednesday night, but a so-far six-point rally has yet to test even a single prior peak on the hourly chart. Bets at this point are ill-advised, even if we can safely assume that, for gold at least, it will all be over by dawn.