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COMMENTARY for Monday
TODAY'S ACTION for Monday
Rick's Picks for Monday
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There’s no rally target for Silver precisely analogous to the 1208.80 pivot I’ve flagged in Gold, but the one that comes closest lies at 19.545, a nickel above last December’s watershed high. Greater clarity can be found on the hourly chart, which says the futures are bound for at least 19.530. If they noodle around the midpoint at 18.510, we should look for opportunities to buy there JUST before SI takes off.
We hold 800 shares with an adjusted cost basis of 11.75 against eight May 18 calls that we shorted for 0.64. The covered write limits our upside participation above 18.64, so we may try to buy May 19 calls to get back in the game: not immediately, however, because Friday’s high came within pennies of a Hidden Pivot target that should give way to a correction of this by-now parabolic rally. _______ UPDATE: Do nothing further right now, since I don’t fancy covering a covered write when the underlying stock is in a parabolic move. I might have advised doing so earlier if I’d noticed that the April 15 high had impulsed above the 17.80 peak notched on January 11 (see chart). Instead, I was asleep at the wheel, missing archival-quality camouflage that became manifest on the $1.03 pullback that followed this very subtle breakout.
All charts point higher, but it will be most useful to settle on one that can tell us how high the current, minor cycle is likely to go. The pattern I like comes from the weekly chart (see inset) and yields a Hidden Pivot target at 1208.80. We’ll use that number as our minimum upside objective for the near term — and please note that I consider this a very high-confidence call. A pullback to 1166.60 should be considered felicitous, since that’s the midpoint associated with our rally target and therefore an excellent place to attempt to augment long positions.
Two patterns embedded within the Euro’s recent decline point to essentially the same “D” target, which looks buyable. The Euro spent the second half of April declining to new lows for 2010, cancelling another rally attempt and renewing its multi-month downtrend. Within this recent decline are two valid and active patterns, one of which is especially appealing, whose “D” targets differ by only one pip. The better pattern aims for 1.2935. Traders should risk $125 per contract in the June futures by buying at 1.2938 with a stop at 1.2928. (Posted by Doug McLagan) _______ UPDATE (10:25 p.m. EDT): The Euro futures missed our recommended entry price by one pip this evening and have spent more than an hour tracing out a familiar bottoming pattern: a quick pop up, a re-test of the low which bottoms slightly higher, and as we write, an acceleration upward. We will invoke the “no sloppy seconds” rule at this point and cancel the recommendation, as the odds in our favor are now much diminished. We do want to point out that for both of the patterns in question, the low was more than 99% of the way from “C” to “D”.
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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
Bob Bronson takes a closer look at the 3.2% GDP growth recently reported, only to discover that statistical sleight-of-hand was used to hype non-existent growth (For a look at some interesting charts pertaining to growth and the likelihood of a double-dip recession click here, then click on one of the charts that comes up in your browser):
“They’re at it again. Permabulls and new bulls promoting the notion that a deep or sharp V-shaped recovery is well under way, using just-reported Q1 GDP data for support.
Instead of noting that the headline figure of 3.2% annualized growth was down 40+% from the Q4 growth rate of 5.6%, showing sharp deceleration in the so-called economic
recovery, they’re saying that Q1 was the third consecutive quarter of positive growth following three quarters of negative growth, suggesting a picture of a balanced V-shaped
recovery, precluding a double dip recession.
“In fact, the GDP growth rate previously declined four quarters from its Q2 ’08 peak and six quarters from the NBER designated start of the recession in Q4 ’07. Moreover, it declined seven quarters from the Q3 ’07 peak of what we define and carefully track as the core business cycle – see the first chart below. Still further, the shape of the recovery is much worse than suggested by even seven down quarters followed by three up quarters, since the rebound to date has retraced only 17% of the total decline, rather than the 42% suggested by a picture of a three-sevenths or greater retracement.
“Both permabulls and new bulls know, or should know, that a double dip recession, with its W-shaped bottom, starts with a V and is followed by a second V, so in any
event the characterization of a V-shaped bottom doesn’t at all preclude much more complexly extended bottom formations. But our work shows that even a double-dip, or W-shaped bottom, is likely not all it will take to finally end this deflationary economic Supercycle Winter. To fully end it, we expect three V–shaped troughs over the next four to five years in what we call after-shock, double double-dip recessions, as we more broadly forewarned in this 12/23/06 article: Are You Prepared for the First of Three Perfect Storms…
“The second chart below illustrates the Q1 GDP update of our working model of the double double-dips we expect, followed by a range of possible similar shapes of
what can be more broadly thought of as a very wide U-shaped trough, or \____/ , rather than even the upside-down square root sign that only a few economists
are expecting, as compared to the deep and/or sharp V-shaped and eventually self-sustaining recovery that the current consensus of them expects.”
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Greek Debt Woes Like a Bad Penny
by Rick Ackerman on May 3, 2010 12:01 am GMT · 21 comments
Europe was putting the finishing touches on yet another bailout for Greece over the weekend, even as new scrutiny fell upon the growing problems of Spain and Portugal. Under the latest rescue package, the IMF and 15 nations – presumably including Spain and Portugal – will pony up $133 billion to keep Greece from defaulting. Will that be enough? Although it more than doubles the amount of an emergency credit line extended to Greece less than two weeks ago, some observers think it could take as much as $700 billion to avoid bankruptcy. One thing’s for sure: For the average worker, the austerity measures imposed on Greece by this » Read the full article