Thursday, June 10, 2010

I'm going to open a trading room for much of the day, since it may be necessary to stalk the E-Mini S&Ps and Diamonds in real time to get short with relatively little risk.  The session begins at 9:15AM. No password is required to join. The session is now closed.

I'm not sure where the residual value will lie when BP is charged with cleaning up beaches from Trinidad to Aruba to Namibia and beyond, but the worst- case bottom I can project using the weekly chart is 18.39, a clear and important Hidden Pivot (A=77.69, B=33.70 and C=62.38).  That number looks like a lock-up to me.  Perhaps it represents a bid from one of the surviving majors?  Or maybe it'll be a tender from Kevin Costner, armed by then with a low-cost technology for undoing all of the damage.  Hey, whatever happened to Costner's Tom Swift contraption, anyway?

For years, almost nobody paid attention to the sky-is-falling alarms of Edward Hugh, a gregarious British blogger and self-taught economist who repeatedly predicted that the euro zone could not survive. via Blog Prophet of Euro Zone Doom - NYTimes.com.

Unlike the E-Mini S&Ps, the Diamonds didn't quite reach their rally target yesterday.  I was projecting a 101.08 top, but the actual high occurred at 100.78.  The failure is bearish on its face, but it is perhaps even more bearish that the bounce from Tuesday's low has sputtered out so quickly.  That low was linked to the key bottom at 97.75 recorded on May 25, and if it is breached we can expect the selling to continue down to at least 96.12.  While it is too late to jump on the July 96 puts as originally intended,  I will note nonetheless that if it pops above a midpoint resistance at 2.52, it's headed to at least 3.29.

My apologies for yesterday's lapse, since I had Wednesday's intraday high, 1077.75, nailed within two ticks during the weekly tutorial session. In the future, I would encourage those who attend these hour-long sessions to spread the word in the chat room if any tradable opportunities emerge.  A goal of the classes, besides teaching, is to  send participants out the door with a tradable idea for that day. That was especially true yesterday, since we'd been itching to get short by hook or by crook. To borrow from Rahm Emanuel, no opportunity to short this 15-month-old bear rally should go to waste.  So where does that leave us, now that the downtrend has progressed 25 points from Wednesday's high? Essentially, competing with a zillion other traders who are itching to get short.  Yesterday's whipsaw was as much as  telling us it won't be easy, so we'll work harder at it today, staying close to the lesser charts intraday rather than hanging on a one-size-fits-all number disseminated the night before.

This is probably the last place you should look to find a reference to a head-and-shoulder formation, since I've always said they are useless at best and misleading at worst. That said, the H&S-y demeanor of Silver's chart is sufficiently striking that perhaps we ought to use the pattern somehow.  My suggestion would be to let it persuade us that Silver is about to do...nothing, much as it has been doing (within this pattern)  since late March.  H&S true believers will doubtless want to infer that a plunge to around 16.500 awaits, but that is exactly why we should pay these formations little heed -- i.e., because the very obviousness of the pattern makes such a plunge a remote longshot. (And even if it does happen, we'll have weeks to prepare, at least according to this chart.)

With a grave threat to world peace and stability emerging in yesterday’s news, there was the Dow Average, up 72 points at the time, as oblivious to reality as a swami who’s been in a trance for a week. Concerning the magnitude of the threat, don’t take our word for it.  Here’s a link to an article that makes clear how serious Iran is about running Israel’s blockade. Ahmadinejad has pledged warships and submarines to back up Turkey’s fleet, which at this moment is steaming toward Gaza.  The impending showdown, the Iranian president vowed, “will change many issues in the world and mark the final countdown for Israel's existence. It shows that it has no room in the region and no one is ready to live alongside it."  Does that sound like a bluff?  Contrast the palpable menace of his words with the whimsical sound bite from Hillary Clinton earlier this week when she predicted “Iran would pull some sort of stunt in the next couple of days” to divert attention from the unity with the Security Council. Are we actually supposed to believe that the U.N., which sat by idly as the mullahs went nuclear, has the will, let alone the ability, to prevent a deadly showdown between Israel and its enemies? And where is NATO when you need it? Turkey is a member, albeit one whose good standing may have been fatally compromised when the country almost overnight became a blood enemy of Israel (and therefore, of America).  One surmises that strategic alliances have shifted so rapidly in the post-American vacuum ushered in by Mr. Obama, that NATO doesn’t know where it stands. There really is no NATO any more, as this incident makes clear, and so it will be up to our President alone to put the

We took a hard look at gold's charts yesterday in several time frames, concluding that the selloff then in progress, nasty though it may have seemed, was as harmless as a dust bunny. We also noticed that the intraday low at 1223.10 was more precisely predictable than I'd known earlier, since it fell exactly on a Hidden Pivot target.  I used a one-off point 'A'  in my calculation, but if I'd substituted the obvious peak instead, the forecast would have nailed the low to-the-tick.  Concerning gold's immediate prospects, I doubt that investors can continue to ignore the urgent press of events for too much longer, and that is why we will look for every possible opportunity to buy near these levels. The most obvious pattern on the hourly chart projects to 1265.50, with an entry trigger at 1233.70 (where August gold is trading at this very moment).  However, the futures are showing no particular energy right now, so I can't recommend arbitrarily jumping on the trade. Instead, I'll suggest looking for camouflage opportunities if and when a rally brings buyers into the mine field of peaks shown in the accompanying chart. FYI, the midpoint pivot of the pattern that projects to 1265.50 is 1244.30, and any move decisively past that resistance would imply the futures are on their way to the higher target.