Wednesday, August 11, 2010

Newmont's health appears somewhat more precarious than that of gold futures, since the stock is working on a bearish impulse leg of daily-chart degree created on July 28 with a low of 54.30.  We'll use a midpoint support at 55.34 as a minimum correction target from here, but if the stock closes below it for two consecutive days it would be warning of more downside to as low as 52.68.

"Dueling impulse legs" on the daily chart yield a mildly negative bias for perhaps the next 5-8 days, but there's no evidence that the futures are about to fall apart. In fact, they could pull back to as low as 1165.10 over that time and still be considered perfectly healthy. Most immediately, however, there is downside jeopardy to as low as 1190.50.

Let's try to cover our three put spreads for a debit of no more than 16 cents per, since this backspread position can only hurt us if the Dow plummets next week. In fact, we wouldn't start to make money on it unless the Dow were to fall more than 900 points.  At yesterday's closing prices the spread could easily have been bought back for a 0.13 debit by selling two August 98 puts @ 0.06 and buying one August 102 put for 0.25. Also, for good measure, bid 1.00 for four September 101 puts, day order.

The futures were down the equivalent of a hundred Dow points early Wednesday morning, driven by weak Asian markets waxing fearful over the U.S economy's apparent relapse into incurable sickness. The low so far tonight has been 1107.25, but there's a Hidden Pivot support at 1101.00 that we should use as a minmum downside target for now. The fact that the decline of the last three days is occurring without the future's having exceeded the 1129.50 peak of June 21 (see chart) is quite bearish, the moreso because bulls spent so much time just beneath it trying to break through.

Asian markets were getting hit Wednesday morning, chastising Wall Street for the 100-point recovery rally that shaved yesterday's losses in the final third of the session. The market feels toppy enough that we should want to short into whatever modest rally DaBoyz are able to contrive.

Stirred into this week’s lively discussion of inflation/deflation was the notion that although Americans seem to live better now than they did fifty or sixty years ago, our parents and grandparents would be appalled to see how deeply in hock we’ve gone to enjoy the supposed good life. And if the standard of living has risen so impressively, why is it that the single-income, middle-class household of the Fifties could afford things that are barely within the reach of households that today are supported by two incomes? Sure, your neighbor has a composite-frame trail bike that he bought for $4000, another a $30,000 movie room, and your good buddy and his wife went scuba diving in Tahiti last Christmas. But did they have to take out a home equity loan to put their kids through college? And will the kids be able to pay back their fair share out of the meager income they have begun to earn with their $150,000 degrees in business administration, journalism, advertising and English literature? Some readers may recall the scene in the movie Back to the Future where a motorist pulled into a gas station and a swarm of attendants gave his car the kind of once-over that all filling stations routinely provided in the 1950s, checking the oil and fluid levels, and even putting air in his tires.  Setting aside the fact that this mini-inspection, if so princely an amenity were even offered, would probably add 25 cents to the price of each and every gallon of gas sold today, consider that the lowly gas-station attendants were likely in better financial shape than most middle-class couples are today. With his small monthly mortgage payments and easily manageable grocery and medical bills, the filling-station employee probably had enough left over each month (after taxes!) to accumulate a