November 2010

Silver seems so comfortable cruising at 30,000 feet, just below a multi-decade high that looks like Everest on the weekly chart.  More of a correction would have been the gentlemanly thing to do, but bulls seem to have other designs -- namely, the impalement of all the dirtballs who for decades have made too easy a living holding prices down. Monday night, the futures were retracing an exuberant, after-hours war-whoop to 27.490, tracing out an abc correction that could bring them down to as low as 27.020.  Night owls can try bottom-fishing at the midpoint, 27.170, using a stop-loss as tight as 27.160, although two more ticks would give you an extra "structural" support to lean on on the two-minute chart. _______ UPDATE (10:40 p.m. ET):  Looks like the criminal element has control at the moment, although in crashing the futures in the space of  single minute, they failed miserably to make the 27.020 target highlighted above irrelevant.  It is in fact the evening's low as of this moment, and if you had a stink bid in I'd suggest taking some profits now, with the futures trading 27.105.  A break-even stop should be used for what remains.

Short-term signs portend a modest rally to 1377.60, but you'll have to improvise your own way aboard, since the five-minute chart that might allow decent camouflage has become too cluttered and claustrophobic to yield one glow-in-the-dark opportunity.  There are in fact many of them, but they are changing from one hour to the next.  FYI, the midpoint resistance by which you can judge the sincerity of any breakout lies at 1370.70.

The painfully constipated price action of the last two weeks argues against our trying to swing-trade this vehicle. It's for day traders only at the moment, and my bias from a Hidden Pivot perspective is mildly bullish, since no "external" lows on the daily chart have been breached in the pullback from the 1224.50 high recorded on November 5.  Night owls should check out a very minor corrective pattern on the 5-minute chart that could conceivably allow tightly stopped bottom-fishing at an 1183.00 pivot. _______ UPDATE (3:14 a.m. ET): The futures dipped to 1181.25 before the bounce we were expecting happened, but the best you could have done was grin and bear a five-tick ($62.50) loss if you'd traded this one without camouflage.  The countertrend rally is perfectly clear on the five-minute chart and should be assumed headed for at least 1194.75 once midpoint resistance at 1188.00 has been surmounted. 

We'll put plans of legging into a bullish butterfly spread on the back burner for now, since AAPL looks like it could noodle around for a while -- for a long while, perhaps.  The next moon shot has the potential to reach 393.51, but it's possible the stock could pull back to as low as 240-250 to stage for it. That implies a bearish butterfly opportunity centered on the 250 strike, but it could be a tortuous wait, since there are no strong indications at the moment that AAPL is keen on correcting much lower than around $300. A flash crash shakedown could do the trick, but were it to occur, we probably wouldn't have enough time to exit the butterfly at the fat profit a swoon to $250 would likely provide.

After a long holiday weekend, U.S. stocks came stumbling out of the gate Monday, unable to determine how, or even whether, they should react to yet more “strength” in the dollar.  We’ve wrapped the word “strength” in quotes because it is only in relationship to a euro enfeebled by financial crisis that the dollar could ever appear to be strong. And so it was yesterday, with the Dollar Index rallying to within 0.66 points of an ambitious, 81.80 target we’d sent out to subscribers the night before.  We had thought the latest eurocrisis had been laid to rest with the imposition last week of a bailout package on Ireland. The country had officially requested help, after all, and one might have thought that the ratification of the deal would have been automatic.  Turns out, the Irish people themselves will have a say, since their parliament will meet on December 7 to pass a budget that may or may not incorporate the provisions of the bailout.  Those provisions evidently were not buried in fine print, since fully one percent of Ireland’s population marched on Saturday to protest them – to protest the tough strictures that the bailout, worth an estimated €85 billion, would impose.  For starters, any money borrowed would have to be repaid at 6.7%, a return that even the most aggressive hedge funds are not achieving in these deflationary times. And for two, the Irish would have until 2015 to get the budget deficit down under 3% of GDP, in accordance with EU rules. If that’s the best that lenders have to offer, then at least 50,000 to 100,000 Irishmen who marched over the weekend would rather tell the IMF to shove it than accept all the strings that would come attached to the deal.  And If the Vote Is

As of around 9:40 p.m. Sunday night, the futures were bouncing precisely from a Hidden Pivot midpoint at 26.525. This would make its 'd' sibling at 26.080 a high-odds place to try bottom-fishing, except that the bounce is within just a few ticks of surpassing the point 'c' of the pattern yielding the target. If the rally continues, exceeding a peak at 27.365 made Friday on the way down, this would be especially bullish for the near term, since it would amount to a trend change occurring following a retracement that got no farther than its c-d midpoint.  All of this is illustrated in the accompanying chart.

We set modest bullish benchmarks for last week that the futures failed to achieve, implying they are in no great hurry to ascend to the 1429.30 target given here earlier.  It will remain valid nonetheless if 1331.10 has not been exceeded to the downside, but we should require a two-day close above the 1380.20 Hidden Pivot midpoint before we infer the futures are on their way. Camouflage artistes may find a long-entry opportunity Sunday night or Monday morning via an impulsive thrust just exceeding the two peaks shown in the chart.

The futures are entering their third week of tedious consolidation after having created a potent bullish impulse leg of daily-chart degree. If there seems to be a contradiction in this, there is:  It is like revving a dragster to the redline, only to have it smoke rubber for a full minute.  My hunch is that the futures will feint lower this week to resolve the standoff, then rally moderately into early December, though probably not till year's end. Most immediately, there are no juicy trading opportunities that I can discern, only the prospect of a herky-jerky move lower in the days ahead.  Night owls looking for a camouflage entry spot Sunday night will not have found much as of around 9 p.m., since price action thus far has added up to no more than meaningless noise. Nevertheless, the futures can be bottom-fished at 1180.25, stop 1178.75, provided the low is reached by no later than 1 .m. Eastern. ______ UPDATE (12:21 p.m.): The recommended trade was a non-starter, since the futures didn't make it down to 1180.25 until 5:30 a.m. The decline reversed Sunday night's overcooked short-squeeze, putting the futures on course to reach an 1175.75 downside target that was easily visible on the 5-minute chart (a=1200.50).  The fact that the target was overshot by 3.50 points in the opening hour suggests more weakness ahead, even though the futures are rallying at the moment.

The nearest rally resistance lies at 80.72, a Hidden Pivot whose provenance is shown in the accompanying chart.  Judging from the way DXY shredded its sibling midpoint at 79.35, it seems highly likely to be reached and should therefore serve as a minimum upside objective for the near term. If the target gives way easily, however, we should raise our sights to at least 81.80, a 'D' target realized by using the November 4 bottom as our point 'A'. _______ UPDATE (12:03 p.m. ET): DXY sold off for six hours after topping within 0.07 points of the 80.73 target. They then embarked, almost without pause, on a rally that has reached 81.14 so far. The clear implication is that DXY is bound now for a minimum 81.80.