Friday, August 6, 2010

It's been a while since we looked in on this stock, which appears headed for 164.05, an important Hidden Pivot off the daily chart. Traders should look to do their buying using camouflage on a small abc reversal uptrend from near 152.80, the midpoint of the relevant C-D leg.

My short-term outlook is neutral, as in Gold, but if Silver were to plunge gratuitously it would become a tightly stopped buying opportunity at 18.075, a Hidden Pivot. The midpoint sibling of that number is 18.280, and the same analysis applies -- i.e., a bounce from the midpoint or higher that "goes impulsive" on the hourly chart would be a very bullish harbinger for next week. ______ UPDATE (3:00 p.m. EDT): Today's modest rally is technically meaningless, since the futures still need to take on two daunting peaks to generate a fresh impulse leg on the hourly chart. The peaks lie, respectively, at 18.700 (August 4) and 18.820 (June 30).

I have no bias at the moment, either bullish or bearish, but if the futures should dive for no apparent reason to 1186.30, you can buy there with a stop-loss as tight as four ticks. That's a Hidden Pivot support off the hourly chart (A=1205.50), and its sibling midpoint lies at 1193.50. If that number is hit or closely approached and the futures reverse to create a bullish impulse leg on the hourly chart, it would be a very encouraging sign for next week. _____ UPDATE (12:37 p.m. EDT):  Exactly the encouraging sign we wanted to see occurred when the futures rallied to create a bullish impulse leg on the hourly chart without having quite reached the 1193.50 midpoint support. The actual low was 1194.50.  _______FURTHER UPDATE (2:52 p.m.):  Gold went on to slightly exceed the 1212.50 target we'd been using as a minimum upside objective. The actual high so far today has been 1213.30.)

No change:  An all-too-familiar rally target at 1136.50 remains our minimum upside expectation, but the futures will need to surpass mid-May’s 1142.75 peak to hint of still more upside to come.  There’s a second pattern that projects to 1141.25, but that too would fall just a tad shy.  Either of these Hidden Pivots can be shorted with a one-point stop-loss, but I wouldn’t suggest initiating the trade if the target is hit in the final 60 minutes of the session. Please note that you’ll be on your own if it fills.

The more eager we grow to short this airborne turd, the less obliging it becomes.  Look at the three-minute chart if you want to see price action that's bound and determined to make nonsense of any prediction or strategy we might hazard. Previously identified rally targets at 107.61 and 108.75 remain valid nonetheless, but I'm not going to pretend they're likely to blossom into opportunities today. Suit yourself, since this one will have to be catch-as-catch-can into week's end.  We remain short the August 102/98 put three times in a 1:2 ratio @ 0.76 per.

Chiding the inflationistas here yesterday, we elicited a torrent of informative responses, including the 5000th post to the Rick’s Picks forum (worth a free 30-day subscription to the lucky lady!).  We’re going to stick with this provocative topic for now, since we think it’s crucial that readers understand why deflation will be with us for a ruinous while, notwithstanding The Guvvamint’s desperately extravagant but so far ineffectual attempts to resuscitate inflation in the housing sector. A popular misconception is that the Fed stands ready to do “whatever it takes” to beat deflation. In fact, the Fed has already shot trillions of dollars at the problem without producing even the tiniest blip in home prices. That’s because countervailing forces of deflation are drawing irresistible power from the deleveraging of a global financial edifice once valued at nearly a quadrillion dollars. Under the circumstances, Helicopter Ben & Co. might as well be attempting to raise the level of the seas using a garden hose. For our part, we have long expected home prices to fall by at least 70%, and nothing we’ve seen so far has changed our outlook. The implication is that home prices, even after having fallen for nearly three years at the steepest rate since the Great Depression, are no more than halfway to the bottom. Concerning the inflation-vs-deflation debate, we’re going to try and kick the level of discussion up a notch or two with a couple of suggestions.  First, because the pro and con arguments often bog down in pseudo-intellectual claptrap about what constitutes “money,” we are going to provide you with foolproof way to recognize deflation for what it is – namely, an increase in the real burden of debt. Some will say that this is just a symptom of inflation, but we would tell them that