September 2010

Dick Morris thinks the pundits are underestimating the odds of a Republican landslide in November.  Although most are predicting a GOP pick-up of 40-50 seats in the House and perhaps 8-10 seats in the Senate, the astute Morris, who was Bill Clinton’s closest political advisor, thinks a blowout is possible, with Republican gains of as many as 100 seats in the House and 14 in the Senate.  However, if Morris’s forecast proves correct, we’d suggest that conservative voters not get their hopes too high for a return of good times, since, arguably, the problems besetting the economy are so profound as to lie beyond political remedy. We don’t mean to suggest that those problems are insoluble – only that no politician would be able to muster the votes necessary to do what needs to be done. For starters, the government would have to let the big banks fail, since they are eventually going to fail anyway. However, even politicians who understand this wouldn’t dare appear to countenance it.  The only Congressman we can think of with the guts to push for the “nuclear option” is Rep. Ron Paul.  Mr. Paul is also one of very few office holders who understands economics well enough to explain with perfect clarity why removing the banks’ supposed safety net is the only solution that will work.  By allowing derivatives markets that have been brain-dead for years to clear, the “anti-bailout” would give the economy a fresh start, albeit one providing a significantly lower standard of living for most Americans. It would be a very tough sell, for sure, and no matter how compelling Rep. Paul’s argument, he’d be bucking a status quo that clings more and more desperately to the hope that the markets will return to health by themselves. Under this scenario, the more

Prayerful shorts should check out today's tout for the E-Mini S&Ps, since it raises the prospect of a painful autumn. Indeed, with relatively small push, buyers could put bears on the ropes for...weeks, if not longer.

If you're looking forward to a market collapse any time soon, you had better factor in the likelihood that AAPL, a key bellwether, would be headed very strongly in the opposite direction. Today's analysis calls for a run-up to 315 -- a 20% move above current levels, and it's hard to imagine a big plunge in the averages if it comes to pass.

Yesterday's rally cleared two daunting external peaks (labeled), setting the stage for bullish action in this stock for weeks, if not months. We can use the 275.44 midpoint of the pattern shown as a minimum upside target for the next week or so, but once it is exceeded on a closing basis -- which I  expect -- the stock will have a shot at 315.32, with only one hidden resistance at 280.86 to buck the stampede.

It was all downhill yesterday after the opening bar, and you can look for the same, dead-tired, bull-trap con-game again this morning, except with perhaps even less energy. Regardless of whether the first hour will be as good as it gets, night owls can bottom-fish a Hidden Pivot support at 1098.25 with a stop-loss as tight as two ticks. The relevant pattern is shown in the accompanying chart. _____ UPDATE (12:45 p.m. EDT):  Today's "action" is indeed almost too tiresome to watch. Cancel the bottom-fishing bid, lest the demands it makes on one's attentiveness arrest the heart. 

Yesterday's opening-bar short squeeze noticeably failed to pierce a pair of weakling highs recorded in mid-August, subtly hinting of buyers' gutlessness right now. We rarely speculate on such things, but what could it hurt to take a couple of put options home over the weekend? Treat this trade like a likely loser -- meaning, don't buy more than the couple of put options I am about to suggest. Make them October 101s, which settled yesterday at 1.39.  A price anywhere between 1.25 and 1.35 would be okay, but keep in mind that they will start to feel the weight of expiring September puts toward day's end, so if you are modeling their fair value, Monday's date is the one to plug in. _______ UPDATE (12:41 p.m. EDT):  We bought two October 101 puts on the opening for 1.33, a penny off the so-far intraday low. Now, put them out of mind for the time being.

Yesterday's selling was weakly impulsive because the futures needed a couple of running starts to take out some prior lows.  The last of them projected down to 19.575, a Hidden Pivot target that you can bottom-fish via a 19.570 bid, stop 19.555.  It seems likely to be reached because the sibling midpoint support at 19.735 has been trashed and is acting like resistance Thursday night. ______ UPDATE (11:23 a.m. EDT):  Buyers overpowered bears overnight, turning the futures from a 19.700 low to lend yet more weight to the likelihood of a move over the near term to at least 21.630, or 22.505 if any higher.  Please note that these are important numbers with the potential to produce a top of at least intermediate-term importance.

Gold got flogged yesterday and will need to do two things to get back in bullish gear: 1) hold above the intraday low, 1243.50, which is also a midpoint support; and 2) surge to at least 1260.60, creating a bullish impulse leg on the hourly chart.  If the midpoint is breached to the downside by more than $1.00 or so, however, it would likely spell more weakness down to at least 1235.90.  A close below that number would leave bulls on the defensive when the markets reopen on Sunday night. _____ UPDATE  (12:30 p.m. EDT):  The futures have lapsed into screw-the-pooch mode this morning, creating a bullish impulse leg on the lesser charts after failing by $2 to reach the projected low at 1235.90.  On balance, the picture is mildly bearish, but not sufficiently so to warrant further analysis. Gold should right itself shortly.

[Like your editor, Rick’s Picks forum regular Wayne Razzi (aka “Red Will”) is a veteran floor-trader who grew up in South Jersey.  When I asked him if he would like to contribute a guest commentary, I was not expecting the provocative tour de force that unfolds, step by step, below. In the essay, Will asserts nothing less that that the impending collapse of our economic system was meticulously engineered by financial and political sociopaths. Let me attest that his is not some whack-o conspiracy theory; rather, it is the closely-reasoned argument of a highly intelligent person who values truth sufficiently to have searched for it, in the form of an answer to a profoundly disturbing question, for many years. Judge for yourself whether his conclusions tally with your own thoughts as to why the American Dream is about to go bust. RA] As a regular reader of Rick’s Picks and occasional commentator within the forum, I was happy to accept Rick’s offer to contribute a guest commentary.  Unfortunately, my happiness faded rather quickly as each day of the week passed and with each, more and more commentary appeared within the forum.  Normally I am pleased to read through the robust collection of viewpoints and argumentation.  However, and quite regrettably, these are not normal times!  With each day, and each comment, and each reply, I witnessed a slow motion, apathetic paraphrasing of much of my prepared commentary by faceless strangers! So with my best-written plans bested by many of you bloviators. ;- ) , I elected to go with something entirely different instead of offering my all-too-similar take on many of the economic issues that were covered and subsequently expanded upon within the forum. I have a few things in common with Rick, one of which is having been born and