The response to Mario Cavolo’s glowing take on China and the global economy was eye-opening, to say the least. It’s not hard to understand why someone who lives and works in China, as Mario does, might believe that the country’s economic prospects are so spectacular as to all but preclude the possibility of a deflationary depression elsewhere in the world. We’re not so sure ourselves and have a few things to say about it below. But we were nonetheless persuaded by Mario’s argument, and by comments made by others in the Rick’s Picks forum, that China is doing many important things right, economically speaking. Some Westerners don’t come easily to this notion, since it requires one to put aside very troubling concerns about China’s repressive, authoritarian political regime; for it is both unfortunate and undeniable » Read the full article
Because T-Bonds have been dancing smoothly with Hidden Pivots lately, we should assume they are on their way up to at least 130^08 now that they’ve exceeded that Hidden Pivot’s sibling midpoint at 128^05 on a closing basis. Accordingly, traders should position from the long side — and please note that camouflage opportunities have been cropping up on charts up to the 30-minute level. Use of the single-bar ‘C’ would have been the key to any such trade that panned out.
We are short the August 102/August 98 put spread in a 1:2 ratio three times @ 0.76. It’s time to write off the likely trading loss of $228, even though we’ll continue to carry the position toward expiration. In retrospect, the loss came from my having missed exiting some long puts on July 7. We had a profit of nearly $1000 in the position at one time and I should have suggested nailing some of it down. Indeed, there will never be a good excuse for not taking at least a partial profit when puts “come home” as they did for us, however briefly (which in the world of put options means three days, tops).
Silver’s ostensibly sharp rally on Friday, like Gold’s, looks mediocre even on the 15-minute chart. We should want to see a push this week to at least 18.680 before we take serious encouragement, since that’s where a bullish impulse leg would be generated on the lesser charts. As always, the number of prior peaks surpassed without a pause will be crucial to our assessment of strength (or weakness) in the underlying vehicle.
For all of the jacking around on Friday, buyers were unable to create even a single impulse leg on the lowly 15-minute chart. The day’s rallies, such as they were, exceeded one peak but failed to muster the required second, and so we are inclined to see this modest upwardliness as just noise and no more. Even so, to avoid being caught unawares we must monitor two prior peaks on the daily chart carefully, since any unpaused rally that exceeds both would presage more bullish action well into autumn. The peaks lie, respectively, at 1129.50 and 1142.75, so it wouldn’t take much to reinvigorate the bear rally begun nearly a month ago.
Gold has backed off a small precipice, rallying from within just 0.60 of a well-advertised Hidden Pivot support at 1155.00. Look at the accompanying chart, however, and you’ll see that bulls will have their work cut out for them if they want to restore a positive look to the lesser charts. For starters, any rally this week will need to take on external peak #1, and at least one peak “along the wall” (#2=1206.70). I’ll wait to see what Monday brings before I exhort you to get excited. (Note: We’ll move to the December contract starting tomorrow. The corresponding peaks lie, respectively, at 1207.50 and 1210.70.)
It was just coincidence that yesterday’s edition of Rick’s Picks led with a headline about schizophrenia, since a market-watcher could not have asked for a better demonstration of it. At the opening, the futures head-faked the equivalent of 100 DJIA points; then they plummeted the equivalent of 250. Just when things looked darkest, short-covering by bears too stupid and frightened to know when to sit tight drove the futures into a spasm that recouped earlier losses and then some. By day’s end the futures were up 18 points, bears were cowering, Wall Street was jubilant and all was right with the world. I won’t hazard a guess as to where this freak show will head tomorrow, but I should warn bulls nonetheless that the night session is unlikely to deliver much more upside than the 1845.50 target shown. Above it, perhaps after Wednesday’s opening bell, an 1851.75 target will be in play. However, if you plan on intercepting it with a short offer, you had best do so only if you’ve caughta piece of the rally.
We don’t pay much attention to this vehicle other than at key turning points, but the short-term pattern shown looks like a lay-up for traders who see futures contracts as no more than bouncing dots on a chart, waiting to be exploited. There are actually two trade possibilities here: 1) a ‘camouflage’ short as USM slips below the 132^13 midpoint; 2) and a very tightly stopped long from within a tick or two of the 131^17 target. Good luck! Please report any fills in the chat room so that I can establish a tracking position for your further guidance. ______ UPDATE (3:17 p.m. ET): The short was tricky to initiate, but once aboard, your reward came quickly with a drop to a so-far low at 131^26. As noted above, the short should be covered and reversed near 131^17. ______ UPDATE (April 6, 3:57 p.m.): The low of Friday’s violent price swings was 131^21 — not quite close enough to have gotten you long easily. Although this could prove to be an important low for the short- to intermediate term, under the circumstances I’ll assume no subscribers were filled. _______ UPDATE (April 11, 1:03 a.m.): Next important stop on the way higher: 135^17.