Tuesday, July 27, 2010

There's no predicting how high this squeeze will go, although a doubling off June's $27 low should probably suffice to extinguish whatever temptation may have existed in this world at one time to short the stock.  Paradoxically, one cannot help believing that BP shares are destined to fall below $5 -- w-a-a-a-y below -- if one ponders Matt Simmons' version of the story.  He thinks the riser cap is just a stall tactic and that BP will eventually face tort liability for destroying the Gulf of Mexico and probably much more. Click on the link above and you may even find yourself agreeing with me that, most unfortunately, he still does not sound quite like a whack-job.

Silver's intraday charts continue to look more encouraging than Gold's, although it seems likely the latter will drag the former lower rather than both heading higher on Silver's strength. If there's a bullish surprise, however, use a midpoint resistance at 18.330 as a bullish "trigger" threshold for a further move to as high as 18.680.

The pattern highlighted in the chart continues to trumpet a target at 1140.10, a by-now familiar Hidden Pivot support that can be bottom-fished aggressively with a stop-loss as tight as you can handle. Traders should be alert for a potentially tradable bounce from 1155.00 as well, since there's a lesser pattern with a 'd' target at that price.  That last number should be considered our minimum downside projection for the near term, although the bearish outlook is nothing that a thrust to an old and familiar look-to-the-left peak at 1222.90 wouldn't cure. _______ UPDATE (2:50 p.m. EDT): Gold plummeted $26 this morning, bottoming at 1156.90. While this came pretty close to out target, it was not quite close enough to trigger a bottom-fishing bid (which you should cancel in any event).  The target remains valid, but the so-far feeble bounce lends even more weight to the 1140.10 target.

Yesterday's metaphysically enfeebled rally was a downpayment on a bigger push to at least 1136.50 that I've projected for the week. I've reproduced a chart that shows an intraday high that missed its 1112.00 target by a single tick.  Was this foretold by the single-bar A-B-C coordinates I've highlighted? As far as I'm concerned, you can never go far wrong falling crazy-in-love with patterns described by three single-bar highs/lows.  For trading purposes, night owls might want to focus on the tail end of the chart, with its bull ABC projecting to 1115.25.  Catching a ride north will carry the same risk as last night, however: all intraday patterns point higher, ensuring that "everyone" will be trying to get long. _______ UPDATE (10:39 a.m. EDT):  The futures ensured that only a very diligent few would catch the rally when they launched at 2:15 a.m. off a gratuitous dip beneath Monday night's lows.  The high was 1118.75 -- achieved, of course, on the opening bar.  ES then retrenched to a so-far low of 1109.50, presumably to load up for the next push. 

Stocks on Monday achieved a bit less than a third of the gains we had unenthusiastically projected for the week, with the Dow Industrials settling exactly 100 points above Friday’s close. We say we were unenthusiastic in forecasting a 350-point rally because share buyers themselves have shown little enthusiasm for the task.  Even so, they’ve continued to lift offers more or less steadily, producing a rising trendline with a pitch of about 12 degrees. We’ve seen steeper grades driving through Nebraska, but that’s not the point. In fact, the lukewarm, steady buying that has persisted in July is exactly the kind of buying that typically accounts for most of the stock market’s gains most of the time.  This summer’s rally has been punctuated by short squeezes and gap-up openings whenever conditions have been favorable, which has been about once or twice per week. The actual close on the Dow yesterday was 10525, exactly 232 points shy of the 10757 target sent out to Rick’s Picks subscribers Sunday night. (Get free forecasts and access to the 24/7 chat room for a week by clicking here.) If you’re a market timer, we’d suggest paying close heed to that number, since, according to the Hidden Pivot method we use to predict swing points both minor and major, it is not exactly chopped liver. We’ll likely use Diamond puts to get short if and when the opportunity arises, although we would be doing so without any preconceived notions about catching the Mother of All Tops. Simply catching “a top” is usually good enough to chase summer boredom and perhaps make a few bucks in the process, but we would be the first to acknowledge that few have gotten rich over the years by buying put options. (As much could be said of those who