November 2010

The Dollar Index is moving precisely as predicted Sunday night, so I'll suggest monitoring its movement closely relative to the two targets I've provided, especially if you're interested in rhythming Gold or Silver in order to trade them.  The term "rhythming" describes a technique used by slot machine players that involved simultaneous play on two machines. This was in the days of mechanical slots, before digital technology made it nearly impossible to gain an edge on slots without actually cheating.

Liberty has been under assault lately, with Big Government seizing on economic adversity as an opportunity to further its reach into every home, into every life. We are reminded of how precious are our freedoms by the letter below, from an old and very dear friend of ours who who recently began serving a six-year sentence at a minimum security prison. A commodity trader and hedge fund manager, his crime, mainly, was to have promiscuously mingled personal funds with those of clients. Although he does not profess his innocence, the experience of being “put away” has made him fearful of a federal judicial system that be believes has concentrated too much power in unjust hands.  He writes as follows: A heart-felt generic message to you my dear friends, who maintain contact with the evil felon during the holidays. Send me a note, an e-mail, and any prayers such as lighting candles, toasting to my health with strong or mild drink or just a joke or three. Life here is not really hard, but it IS after all, voluntary incarceration. Voluntary you ask? Yes, no fences, no guns or gun towers -- just a severe consequence should we walk out and be brought back chained and disgraced, resentenced and sent to a minimum (fenced, gunned) security prison. But, today, some of our Mexican drug types disappeared, presumably southward (I do not know, or only knew them by sight) into the obscurity of perhaps the Mexican nation? In any event, I wish them well in their furtive freedom. First “Secular” Holiday Freedom is such a precious thing as you all know. The Thanksgiving celebration, the world's first secular ‘holy” day under Lincoln, was designed to bridge the various faiths, most of which clashed seriously, and have a common ground. But, one thing

The next tout updates will be out Sunday night, since I plan to take Friday off.  I'm letting the commentary on "Jubilee" run for the remainder of the week because it has provoked some great responses.  Have a great holiday!

[Nearly three years of strenuous efforts by the Fed to lift home prices has not added even a dime’s worth of inflation to the average dwelling. Perhaps it’s time to try a new approach by bailing out beleaguered homeowners, more than 35 million of whom owe more on their mortgages than their properties are worth.  In the essay below, our astute friend Doug B, a Colorado-based financial advisor and formidable outside-of-the-box thinker, asserts not only that debt forgiveness can help return the real estate market to health, but also that lenders are likely to support it when they ponder the alternative of empty houses falling rapidly into an unsaleable state of neglect. RA] With the latest round of discovery in the real estate market characterized by the foreclosure crisis, it is time to ponder the concept of Jubilee. Originally coined in Deuteronomy and Leviticus, Jubilee refers to forgiving of debt. Not being a student of the Bible, I shouldn’t try to interpret the reasons why it became law in the days of the Old Testament; but being a student of the Housing Bubble, I think I can weigh in on what it means for price discovery as we embark on the “C” Wave of the real estate market collapse. One look at the Case-Shiller Housing Index and you can see that calls for a bottom here or even another 10% lower is wishful thinking under the theology of Bob Farrell’s 10 Market Rules to Remember. Household Debt Ratio John Mauldin has written several thoughtful commentaries on how the carelessness in mortgage underwriting during the bubble will continue to create enormous friction in the foreclosure process, while revealing who the rightful owners are for much of the paper gone bad. Suffice it to say that the Financial Crisis still has some life in

Paying close attention to subtleties can yield analytical rewards, as it did when we noticed how a rally in Silver had failed to surpass some seemingly minor peaks on the 15-minute chart. The implication was that buyers were spent for the day, an observation that later proved to be correct. Gold and Silver were in tired but nonetheless bullish consolidations on this particular morning, but we still found ways to force trades in each via camouflage. We also discussed ways to exploit an expected 15-point rally in the E-Mini S&Ps – a goal fraught with danger, since the futures were already up 15 points, caught in a pre-Thanksgiving short-squeeze.

A Hidden Pivot at 30.155 is equivalent to the one given here earlier for the December contract. The futures have spent the last two days oscillating around the 27.605 midpoint pivot, but to me the action looks more like accumulation than distribution.   Camouflageurs can use the three peaks notched on November 9 and 10 for cover; or even more subtly, the consolidation bars on the lesser charts from Tuesday.

Tuesday's final thrust fell just a tad shy of a minor Hidden Pivot target at 1386.10, hinting that the futures may need some rest at night to stage for the next push.  The bull trend looks healthy, however, because each new up-leg is creating a fresh impulse leg on the lesser charts, as we should expect. The most bullish thing that could happen today to kick things into high gear for perhaps the rest of the week would be a print exceeding the 1397.00 peak-let created November 12 on the way down. However, the futures need only close above 1380.20, the HP midpoint of the pattern shown, to set the stage for a finishing stroke to its 'D' sibling at 1429.30.

An 1175.50 target disseminated during yesterday's pre-opening briefing caught the low of the day within three ticks, although I'd recommended that traders use a two-tick (yikes!) stop-loss if they planned to bottom-fish.  There was nothing exciting in the offing Tuesday night, although traders would have an excellent opportunity to try getting long via camouflage if the futures trace out a pattern very much like the one shown.

Yesterday's 1.3356 low was just 0.0013 points beneath the midpoint support show, but that is sufficient to imply that the now three-week-old downtrend is likely to continue to at least 1.2953, the 'd' target with which it is associated.  There is a lesser but still important support at these levels as well, at 1.3359, and its breach yesterday, slight though it was, is yet further evidence of more weakness to come.  The Hidden Pivot support at 1.2953 can serve as our minimum downside objective for the December Euro, but if and when it is reached, I'll recommend bottom-fishing there aggressively with a tight stop-loss, since corroborating action at the midpoint has been rather precise.