Wednesday, June 16, 2010

I linked two frightening article here yesterday, one of which was written by an organic chemist who said the Gulf gusher was producing large amounts of methane and other toxic gases.  The full article can be accessed by clicking here.   (The other discussed the dire implications of a fractured sea bed.)  Since I am trying to confirm all such stories independently, I sought comment from a friend's son, a PhD candidate at Caltech who teaches in the chemistry department.  Here is what he had to say: "I took a look at the links.  I should preface my statements by saying that my training does not provide me any knowledge in the area of underwater oil drilling.  As someone who works in science, however, there were many aspects of the articles in those links that seemed suspicious.  It seemed a bit conspiracy theoryish, alarmist, and suggestive of pseudoscience.  Many statements are simply made, without any attempt at justification via scientific evidence.  I can tell you that some of the chemistry-related statements in the first article were flat out wrong, and this makes me suspicious of the rest of it.  "The second article states that there is some massive attempt to conceal the truth about the nature of the leak, but it is unclear to me that this would even be advantageous to the supposed perpetrators of such an act, or that it would even be feasible given the number of people involved and the attention the situation has been given.  The note directly after the second article talks about the government's campaign against them is about as conspiracy theory as you can get.  "In summary, I would not trust any statements made in these articles one way or another.  Unfortunately, I don't know anyone at Caltech that knows about this topic.  Good luck with the

An alternative rally target that I put out yesterday for the E-Mini S&Ps left about four points of upside for them above yesterday's high. The obligatory night-time squeeze may make the target moot, but at the moment (i.e., 9 p.m. EDT), DaBoyz were taking the futures lower, presumably to get some running room.

We talked of shorting Goldman for a possible ride down to 122.25, and this rally might provide a good opportunity to do it.  It projects to 138.71, so let's offer 200 shares short at 138.65, stop 138.95, day order.  You can substitute options, but the stop-loss will still apply. ______ UPDATE:  Before diving $1.50, Goldman topped at 138.26 -- not quite high enough to get us short. Cancel the trade, but keep in mind that the very bearish target remains in force if you want to take the initiative.

Gold is caught up in several uptrends of different degree, the largest of which promises to deliver 1340.10 (daily chart, A=940.06 on August 17, 2009).  More immediately, however (and also visible on the daily chart)  is a bullish pattern projecting to 1272.60 that is subject to midpoint interference at 1244.40. A two-day close above that Hidden Pivot is needed to make the push to 1272.60 an odds-on bet, but we can still look to board at these levels by hunting for camouflage intraday. If a fetching opportunity to do so  should arise, I may convene an impromptu webinar (announced in the chat room)  as I did yesterday to show you the easiest way aboard.

Silver kept the bull trend robustly alive with a spike yesterday that slightly exceeded a look-to-the-left peak at 18.585 recorded on June 1. The overshoot was just 3.5 cents, but that's plenty enough to suggest that more upside awaits following tonight's so-far gentle consolidation.  A more daunting peak at 18.815 will be today's challenge, but the futures looked to be in good shape to take it on as of around 8:25 p.m. EDT. A surge from here above $19 would provide a psychological boost as well, since it would badly compromise an all-too-clear head-and-shoulders pattern visible on the intraday charts.

For your guidance, I've assumed that we now hold four July 96 puts @ 0.70, since, during yesterday morning's impromptu webinar, we had discussed shorting the Diamonds if and when the E-Mini futures reached 1110.50.   This they did, and so we made a bet against the trend. The E-Minis could still go as high as 1115.75, a Hidden Pivot, but they are likely to struggle above it.  For now, do nothing further, but you should write off the $280 in your mind, since the puts we hold were intended as a lottery ticket. ______ UPDATE:  Our rally targets (and our short position) will live to fight another day, since the E-Mini futures struggled all day to push past 1115.75, never getting any higher than 1114.75.

Yesterday's installment of the daily comedy played out just as predicted during the impromptu webinar -- i.e., with the E-Mini S&Ps hitting a short-able Hidden Pivot in the final minutes of the session. I'd suggested a three-tick stop-loss for an 1110.50 short, but those of you who had the guts and good sense to stand pat against the actual high at 1111.50 will have only pleasant choices to make Tuesday night. The futures  have sold off to 1106.75 so far, so taking a partial profit would be wise. For those of you who simply bought DIA puts as I'd suggested, I'll track four July 96 puts @ 0.70. I won't hazard any predictions for today, since the futures did all that I could have predicted for them yesterday. ______ UPDATE (3:49 p.m. EDT):  The dike has held -- for now.  The futures spent the entire day lapping at an alternative Hidden Pivot target at 1115.25 that I'd furnished in today's DIA tout and in the chat room, never getting any higher than 1114.75.  Like the Terminator, however, short-covering bears will be back tonight/Thursday -- and nervous -- unless there's exceedingly bad news overnight.

Another 200-point rally in the Dow, and it’s hard to say exactly what has put Wall Street in such a giddy mood. Talk about climbing a wall of worry!   Is it perhaps the increasingly shrill warnings of an oil-induced Armageddon that have sparked a binge of contrarian buying?  Or maybe it's the gap that has begun to open up between a Europe hell-bent on “austerity” and a stimulus-addicted America about to launch yet another $50 billion jobs package?  The money managers who have been recklessly pouring O.P.M. (Other People’s Money) into stocks lately must think the dollar weakness that a tight-fisted Europe will inevitably bring about is going to boost U.S. exports -- what exports? -- and bring back prosperity. But wait, here’s another possibility:  Because Wall Street hates uncertainty more than anything else, perhaps investors are comforted by the growing certainty that our President is so utterly lacking in competence as to all but ensure a landslide victory for the Republicans in the November?  Another factor that could account for the rally is the afterglow of some recent economic data suggesting that housing, jobs and retail sales are all tanking simultaneously following a $13 trillion attempt to get the economy moving. Great!  Now the Fed can finally get serious about lowering rates below zero so that borrowers will literally get paid for doing what already comes naturally. Or so investors must think. Considering the foregoing, we needn’t have wondered why the bulls are so jazzed. In fact, their all-but-insatiable lust for shares these days only proves once again that on Wall Street, too much of a bad thing is never enough. Our Bearish Hunch For our part, we’ve been laying in a modest inventory of put options on the Diamonds as stocks have moved higher. The strategy is highly speculative, since it’s