August 2010

The heavy churning these last two days has occurred in the aftermath of a successful push to the 19.200 target shown in the chart. This Hidden Pivot has so far contained the feisty move, albeit barely, rather than repelled it, so we should infer that Silver bulls are raring to go. Keep a big-picture target of 21.63 in mind as the December contract makes its way higher in the coming weeks.  Its sibling midpoint at 18.19 is where traders should look to load up.

No change. It would take a print today below 1230.70 to create a bearish impulse leg. If the bears cannot achieve that seemingly trivial feat, they'll leave themselves vulnerable to a shoving match that could back them all the way up to 1257.00.  There are potential opportunities for us in any event, since the constipated action of late has created a veritable canopy of "treetops" that we can use to signal the onset of a fresh, bullish impulse leg on the lesser charts. To reduce the number of false entry signals, however, remember to use only patterns with single-bar point-'C' lows.

Armed as always with perfect knowledge, the "market" violently reversed Friday's damage yesterday.  Were they reacting to the message that Japan might, sort of...ease?  Who knows?  We can only sympathize with traders who are forced to extract droplets of meaning from such announcements. They should be glad they are not reporters paid to do the same with Paris Hilton's escapades.  Anyway, I'll use this post to reiterate a 140^20 target given earlier for the September contract. Interpolating to December yields an equivalent at 138^27, or 140^16 if any higher.

We've traded this vehicle successfully before (and unsuccessfully as well), but the only number I can discern that we might use for tightly stopped bottom-fishing lies at 42.25, a Hidden Pivot as well as my minimum downside target for the next 3-4 days.  For what it's worth, the hourly chart brings little more clarity to our task than the E-Mini S&P chart featured today.  Lesser patterns going back 2-3 weeks appear to have exhausted their downside targets, but if you open up more of the panorama, using 240-minute bars to project back to December, the May 6 Flash Crash still dominates the landscape. It yields a nominal Hidden Pivot target at  40.17, but the number has been rendered all but valueless for trading because the pattern that produced it has been muddling its way lower for an asphyxiating three-and-a-half-months. In retrospect, covered-writing into rallies could have been a winner, although not exactly the ticket to riches. _______ UPDATE: Cancel the trade, since it appears that the lunatic fringe has seized control of the broad averages ahead of the holiday weekend.

Yesterday's moderate drop can be ignored, just like all the others, and the rallies as well, since it only served to bring the Dow down to 10000. Let the Indoos close below that marquee number for two consecutive weekly bars, however, and then we can infer it's more than mere noise. That is not to suggest I'm bullish, incidentally. Far from it, and I wouldn't be surprised if April's 1211.25 peak stands for fifty years. More immediately, a bunch of patterns on the intraday charts all point lower, albeit without much clarity, to the following Hidden Pivot supports: 1029.50, 1011.25 and 1001.00. Take your pick, but please note that none of these numbers is worth bottom-fishing without camouflage that would limit risk to three ticks. Finally, and for what it's worth, bulls would need to hit 1080.50 today to get some, anything, going.

[Many readers have pointed out that our long-running discussion of deflation has tended to overlook the impact of price increases, or at least price stability, on essential goods and services. In the essay below, Robert Moore, a frequent contributor to the Rick’s Picks forum, explains how both type of “flations” can co-exist. That he has done so without using the words “inflation” or “deflation” is not merely clever, but persuasive. Read on to sharpen your understanding of how supply and demand interact in an economy where some debtors are being liquidated while others continue to pay their bills and debts. We will mention up-front that although Robert is no “deflationist,” the economic outcome he predicts is exactly what we have long predicted – i.e., a drawn-out drop in the standard of living until all debts have been paid – either by creditors, or debtors. RA] Ok, I’m going to try to make it through this entire essay only uttering the words “inflation” and “deflation” in just this one sentence. Why, you ask? Because these terms are just too ambiguous for a productive economic discussion. Each word has two unique, and distinct (some might say polar opposite) definitions when used in the context of money supply versus the context of general price levels. This degree of ambiguity makes both terms completely worthless in an analysis of cause and effect. There must, by necessity, be a dedicated term to describe the cause, and another term to describe the effect; otherwise you find yourself drawn into an analogous discussion where explosions are causing explosions, and the end effect is simultaneously identified as the root cause -- a rational impossibility. So, before we go much further, let’s settle in on some fundamental ideologies that I hope we can all agree on: 1) As demand

Following is a recent dispatch from subscriber Jonathan Auerbach, who has returned to Azerbaijan in search of investment opportunities: One hundred years ago Baku provided half the world's oil. Today, equi-distant from Iran and Russia, this capital of Azerbaijan occupies a Swiss-like privilege knowing that neither state wants to disrupt or would tolerate an infringement of their buffer presence. Nevertheless Azerbaijan is beginning to deal with important considerations of capital market developments as the clever people with whom we met acknowledge that peak oil production could be hit within several years and would begin to diminish the 90% contribution energy related activities provide to GDP. This is a wealthy country of 8 million people with a functional stock exchange which doesn't trade any equities and should. On my last visit 4 years ago I remarked on the extraordinary Art-Deco and Soviet Suprematist architecture that captured the richness and charm of Baku. This week I was flabbergasted by the dramatic change into a form of 'Baku Land' with an 8-lane superhighway from the airport into the city lined with massive newly-built palatial apartment houses which do not appear to be occupied. The city waterfront now includes a gigantic mall, convention center, a requisite 4 Seasons Hotel (soon to open), high-end shops, and broad walkways that at 11 in the evening were packed with strolling locals. Traffic was at times inpenetrable. Dubai Redux? Hopefully they are not going down this road of de facto statism and we, accompanied by several institutional investors all of whom are looking to broaden their reach in the Frontier world, made a strong case that they must develop the growth of their capital markets on a private basis that will encourage the many wealthy families to diversify their industrial ownership as well as spur the creation of SMEs and needed import substitution

So much for the "Damage? What damage?"  phase of BP's heavily engineered short-squeeze. Last week's selling created the bearish component of "dueling impulse legs" on the daily chart.  The stock appears to be weighed down by the reality of dealing with the spill legally and environmentally, and last week's price action suggests it could be a long slog before shareholders get another chance to bail out on a feeding frenzy.

The burden of proof has weighed on bulls since the summer solstice high (1129.50), which contained the gutless, month-long short-squeeze that unfolded following Independence Day. From current levels, buyers would need to reach 1098.75 in a sprint, since that's what it would take to turn the daily chart bullish for the first time in ten weeks. The hourly chart already is bullish, but it took some brazen manipulation to make it that way, including a news-driven trampoline short-squeeze off Friday's double-bottom low.