November 2010

Gold's nasty, $100 slide has reversed from a low just shy of a visually obvious bottom at 1325.50 that launched the last, record-breaking rally. That's bullish, but we'll need to see further confirmation in the form of a new impulse leg of hourly-chart degree. A print at 1376.70 today would do the trick, but we'll use a less demanding indicator at 1369.50, a look-to-the-left peak notched November 15 on the way down.  A thrust today exceeding that number would put bulls back in charge of the short-term trend, at least.

Ready to try another butterfly?  We racked up a theoretical profit of $1360 the last time around, so it's only natural to want to do it again.  This time, although I have no specific rally target in mind, we'll be betting on the likelihood that AAPL shares will continue to move strongly higher over time.  But first they look likely to correct some more -- presumably down to a Hidden Pivot support at 292.87. With the goal of legging into the January 330-340-350 call butterfly at no cost, let's start with the purchase of two January 330-340 call spreads if and when AAPL falls to the 292.87 target.  The spread closed yesterday for 1.90, but we should be looking to pay no more than 1.25-1.30.  I've included a snapshot of an option calculator that shows how I estimated fair value.  The volatility estimate, 29, comes from TradeStation and is crucial to my assumption. ______ UPDATE (12:02 p.m. ET): Far from correcting, Apple has used the stock market's broad rally today to reassert its primacy as the highest-beta stock of them all.  AAPL is up more than $8 at the moment, so we can forget about stealing the January 330-340 spread for relative pennies.  Assuming the rally continues -- a safe bet, since the company is one of a bare handful of firms in America that are making money the old-fashioned way, hand-over-fist -- we'll consider legging into the butterfly from the opposite direction -- i.e., shorting the January 340-350 call spread when AAPL approaches a Hidden Pivot rally target. _______ FURTHER UPDATE (Sunday, November 21):  There are innumerable ways in which things could play out this week, but if any of the possibilities has the potential to yield an edge as we contemplate legging into  bullish butterfly spread, I will signal it both here and in the chat room

(When we talk about “honest money,” most of us have in mind a currency that can be freely exchanged for gold. In the essay below, Steven George Fair, a frequent contributor to the Rick’s Picks forum, explains why the choice of what we deem money is fraught with concerns about the very nature of liberty, and about our willingness to order our economic lives with money that has been imposed on us by feudal overlords. Ralph Waldo Emerson once wrote that “A man is usually more careful of his money than he is of his principles.”  And therein lies the problem, even for those who would attempt to make a fresh start with bullion-backed money. Ultimately, it’s not the backing that is crucial, but the freedom for individuals to decide for themselves what is acceptable as money. RA) There is sage wisdom in the study of history.  Historically, the same arguments that are raging today in regard to economics, government, and Nature are the same arguments that have always raged.  The only change is the players, and no real change occurs in us because, after all we are men and women, male and female, rib of my rib. Culturally there are those tribal cultures that base wealth on time to eat, laugh, play, and enjoy family.  And then there are the traders: those that stretch out to gather more than is needed to sustain happiness, seeking obsessive control. I'll focus on the traders.  Each generation thinks they are different, and superficially they are -- in the way they wear their hair, pierce their bodies, or color their skin.  Beyond the superficial new way of being, we are the products of where we come from, or where we think we come from.  Our generational arguments are based in belief in Creation

With Gold and Silver down sharply earlier in the week, we were keen to determine whether the correction had seen its worst. There was some evidence of this in Silver’s price action. The December futures, for one, were creating bullish impulse legs on the lesser charts even though Gold was languishing. The action in Silver Wheaton shares was especially encouraging, since SLW was moving robustly higher without having achieved a ‘d’ correction target. Even though the markets in general were quite sluggish, we were able to find subtle camouflage opportunities in several vehicles, including the E-Mini S&P.

The Hidden Pivot target at 1.3373 (erroneously given earlier as 1.3773) shown in the chart looks very promising as a place to attempt bottom-fishing with a tight stop-loss. Accordingly, I'll recommend bidding 1.3375, stop 1.3368, day order.  Because the futures have trashed the 1.3574 midpoint, we should also view the target as a minimum downside objective for the near-term. _____ UPDATE: Cancel the bid, since the futures are lifting sharply after having gotten no closer to our target than 1.3444. This is quite bullish and implies that your bias should be toward the buy side if you are seeking for trading opportunities.

I haven't stuck my neck out much today, since there do not appear to be any golden trading opportunities in the offing -- at least, none in the vehicles we track closely. I'll be mostly observing, eager to see whether true panics -- the kind that snowball over a period of several days -- are indeed a thing of the past. My hunch is that some things never go out of style.

Pondering HUI's immediate prospects, we can dispense with the subtleties of Hidden Pivotry and appreciate simple gravity at work, hauling the index down to some key lows near 490 that were recorded in late October.  If they are not going to be tested, the retro-rockets will need to fire either today or tomorrow to keep this vehicle from succumbing.  As I've notedabove, you can see this without having to much think about it.  From an impulse-leg perspective, it would require a further fall of 10 percent, to beneath the 476.40 low made on September 10, to seriously damage the daily chart.

Like Gold and Silver, the E-Mini S&P has done little damage to its daily chart in falling somewhat more than 50 points over the last few days. The picture would darken considerably, however, if the selling persists, driving the futures below 1155.50. That would create a bearish impulse leg of daily-chart degree, as well as make any subsequent bounce a tempting short sale. Trades today will most likely come from the 15-minute chart or lower, since there are no Hidden Pivot targets of consequence nearby. Structural supports exist in the form of prior lows near 1167.00, but their value to us lies only in their potential to become, through subtle breaches, elements of camouflage.

All minor patterns point lower at the moment, but we'll stick with the one yielding a 24.855 target emphasized in the update to yesterday's tout.  It holds no special promise for bottom-fishing, but if you're keen on catching an opportune low, I'd suggest waiting for the turn on the lesser charts and using camouflaging provided thereof to get yourself aboard.