Blame seasonality for the fact that sellers were unable to put stocks down for the count yesterday. Weakness remains the underlying theme, however, since DaBoyz were once again unable to rally the Dow back to unchanged even though volume was relatively light. The 992.50 target we’ve been using remains as compelling as ever, but our joy-ride will still be subject to a possible short-squeeze rally today to as high as 1061.00, the midpoint sibling of 992.50. I wouldn’t suggest shorting there mechanically if the opportunity arrives, but it shouldn’t be too difficult to find camouflage on the first ‘abc’ downtrend following a print at or near 1161.00.
COMMENTARY for Friday
Hysterical short-covering in the euro yesterday is said to have been the cause of yesterday’s plunge in commodities, including gold and silver, and the drubbing of the dollar. The jury is still out on the rally’s staying power, however, since it failed to generate a bullish impulse leg on the daily chart (see inset). That could change as early as today with a push touching 1.2685 – about 1% above yesterday’s high.
I cannot recall ever having seen a selloff obliterate Hidden Pivot supports as easily as yesterday’s landslide did. I’d proffered 1212.80 target as a place to “back up the truck” because it was an exceptionally clear and compelling target. In the actual event, the futures took a brief, $7 bounce from two ticks above that number…and that was it. The fact that the rally died after just a few bars warned of the carnage yet to come. The selling was best explained by Dan Norcini at Jim Sinclair’s web site. He saw it as an unwind of gold/euro hedges. The euro soared yesterday, apparently buoyed by the idiotic notion-of-the-day — that perhaps Europe’s financial situation is not so bad as was thought earlier (“earlier,” meaning, perhaps, the day before). This is nonsense, since Europe is in the same deflationary bog as the U.S., irrespective of whether they take “austerity” to heart or instead choose to run the printing presses at full steam. Equally nonsensical was the idea that gold was due for a thrashing just because of a (presumably fleeting) blip in sentiment favoring the euro.
In fact, Gold has been rising — and will continue to rise, once the hysteria we witnessed yesterday subsides – simply because the entire global financial system is being kept (barely) afloat by lies, hubris and an epidemic of delusions. Ditto for the dollar and U.S. Treasurys — possibly the worst excuse for ”safety” that an investment world gone insane could conceive of. We’ll give Dan Norcini the last word, since his assessment seems dead-on: ”Gold is not going to lose its safe haven status because we experience a day of trade unwinding on a large scale. When the focus shifts back to the woes involving the health of the US currency, gold’s fortunes will revive and it will begin moving higher.”
Concerning the technical picture, there is no question that yesterday’s slide did serious damage, creating the first bearish impulse leg of daily-chart magnitude since last June. That event had a bullish outcome, however, and we expect that this one will too. For starters, bulls will need a quick burst to at least 1222.90 today to turn the 15-minute chart in their favor. Alternatively, although I cannot yet predict with confidence how far this correction will go, we can glean a sense of its power in the subtlest rallies and corrections that occur over the next few days. Most immediately, as of around 11:45 p.m. EDT, a minor rally on the 15-minute chart projected to 1211 — $3 above the current price. If it is reached or exceeded, and if the subsequent correction fails to reach its ‘d’ target, that would be a bullish sign for Friday. Long-term bulls should be focused on the ‘p’ midpoint of whatever correction develops on the daily chart, since a breach could imply another leg down as nasty as yesterday’s or even worse. I’ve sketched out a possibility in the accompanying chart.
TODAY'S ACTION for Tuesday
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Rick's Picks for Tuesday
The futures have been down as much as nine points in subdued trading Monday evening, carving out a low beneath the would-be support of last Thursday’s bottom, 1006.00. Still, sellers have shown themselves to be so gutless lately that we shouldn’t count on any more of a reality check than our toothsome 992.50 target would seem to allow. The target has been advertised for long enough that I wouldn’t suggest trying to bottom-fish with the usual nickel-and-dime stop-loss. Instead, traders keen to catch a possible swing low should start looking for a camouflaged turn on the 3- or 5-minute chart once the futures reach 994.50 or so on the way down. If sellers should surprise by overshooting 992.50 by more than a 1.25 points on first contact, take it as a sign that there is significant weakness remaining to be spent over the near term. _______ UPDATE (3:08 p.m. EDT): We stood pat, enduring a short-squeeze that was equivalent to a DJIA thrust of about 280 points. The broad averages have since plummeted back to unchanged, and now, assuming any shorts who had survived until yesterday have been gutted, disemboweled and purged, we can perhaps look forward to a resumption of the righteous and redemptive weakness inaugurated by the flash crash two months ago.
Bulls have yet to show any signs of life, and if they don’t pick up the tempo this morning, we’ll soon be seeing a test of a midpoint support at 1188.70. That Hidden Pivot is tied to an 1162.30 target, so a robust bounce is crucial to the short-term picture — and perhaps the intermediate-term one as well. Alternatively, 1222.90 is still the number to beat, since that’s what it would take at a minimum to turn the lesser intraday charts bullish. Night owls can look for signs of support at 1206.50 if 1210.10 is not exceeded to the upside first, but I wouldn’t lean on it too hard for bottom-fishing, since it looks fragile. _______ UPDATE (11:27 a.m. EDT): A wave of selling overnight has brought the futures down to within 80 cents of the 1188.70 support flagged above. It must hold or a further decline of $26 will ensue.
We continue to hold two August 98 puts for 1.06 and four July 96 puts for 0.70. Time decay is going to be start devouring our July puts this week, but we’ll give them perhaps one more day, since the 95.42 downside target in the underlying vehicle is still valid, and because I utterly lack the imagination to see how the Diamonds and E-Minis could possibly rally before they reach my bearish targets. Granted, tonight’s obligatory, beginning-of-the-week short squeeze has reversed the Mini-S&P’s miseries by 16 points — the equivalent of a 130-point rally in the Dow — but I have my doubts there will be many more bears left to squeeze by the time the opening bell sounds on Tuesday morning.
Friday’s low at 17.635 was the precise midpoint of the bearish pattern shown in the chart, so if it’s breached we should infer that more downside to its ‘d’ sibling, 17.160, is coming. Alternatively, any rally that would turn the hourly chart bullish right now is too much to expect, so let’s lower the bar to 18.815 — precisely where the ten-minute chart would generate a promising, bullish impulse leg.
Newmont suffered damage equal to that of gold futures as a result of last Thursday’s downdraft, and the stock will now need to hold above 57.59, a midpoint support, if it is to avoid diving down its ‘d’ sibling at 55.42. Alternatively, a print at 60.75 over the next day or two is where the very lesser charts would begin to look bullish once again.
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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.
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Will Debt Forgiveness Work?
by Rick Ackerman on July 2, 2010 12:01 am GMT · 96 comments
[This commentary from Rich Cash drew such a heavy response that we are re-publishing it today so that it can enjoy wider readership and a second round of debate in the Rick's Picks forum. It is the second of two radical proposals we have aired for dealing with debt. In the first, Ben Rositas, a frequent contributor to the Rick’s Picks forum, argued for the redistribution of America’s gold bullion to households and to all who are owed. In the essay below, Cash, another forum regular and blogger, broaches the idea of a return to Biblical Jubilee, or something like it. Although we’ll concede that neither idea is even remotely feasible politically, consider the alternative: a debt deflation that locks the economy into a grinding Depression for the next twenty years. RA ]
Here’s Rich, with a message of (debt) forgiveness in his heart – and a plan:
“One Friday in the San Francisco Financial District after work, a group of movers and shakers got together at Harrington’s Pub for a liar’s dice game that rocked their foundations and changed their lives. There was such intense play, they ran out of Federal Reserve Notes. They played with cigarettes, matches and pieces of paper IOUs until stakes reached trillions. They worked in an industry where the credit of their word was » Read the full article