Wednesday, December 15, 2010

I've given "thumbs-down" to the E-Mini S&Ps, since it just spent two days failing to reach a very modest rally target. Even though I've suggested bottom-fishing on the way down, we should use the utmost caution, since this could be the beginning of a nasty plunge.

A Hidden Pivot at 1245.25 is equivalent to the one at 1250.25 that I gave here earlier for the December contract, and there should have been no problem achieving it.  The fact that there was a problem should command our attention and tilt our bias negative for now.  Night owls can nevertheless try bottom-fishing the 1228.00 target of the corrective pattern show, but you should pay close attention to price action at the 1232.75 midpoint, since a precise bounce would corroborate the 'd' target itself.

A midpoint support at 28.615 is equivalent to the one given in today's Gold tout, and it can serve as a minimum correction target for the next day or two.  A pop today above 30.000 would turn the short-term picture bullish, but 30.295 or higher would send bears scurrying and retrain our focus on the big-picture target at 32.285 given here yesterday.

We can use the 1378.70 midpoint shown in the chart as a minimum retracement target, since Gold seems to be having  difficulty sustaining altitude at the moment. Night owls can use the corrective pattern at the right edge of the chart to bottom-fish at 1390.10, the 'D' target of yesterday's histrionics. A two-tick stop-loss is what it's worth, since the downtrend has gone sloppily sideways early Tuesday night. The short-term picture would turn bullish again on a print today exceeding 1412.30. _______ UPDATE (1:48 a.m. ET): The pivot at 1390.10 evinced no support whatsoever, implying that the downtrend is bound for a minimum 1378.70.

Treasury Bonds got savaged yesterday, but more-devastating carnage lies just ahead if our analysis from last week proves correct. Wall Street, for its part, seems to view the impending firestorm as though it were a Yule log. The Dow Industrials rose nearly 50 points on light volume, never even dipping into negative territory.  We’ve seen divers boldly ascend a 70-foot tower and jump into a big wet sponge, but the stock market seems positively arrogant about the dive it will inevitably take onto concrete. Just a week ago, we told you to brace for the worst: “Falling T-Bond Threatens Illusion of Fed Control”.  At the time, yields on the 30-Year were around 4.43%, but we predicted that 4.82% was on its way, and thence 5% and…away-we-go.  Yesterday’s plunge in T-Bond prices pushed yields to 4.56%, so we’re already a third of the way there in just five trading days. A rise of 13 basis points over that period may not seem like reason to panic, but when you consider that trillions of dollars worth of debt – and hundreds of trillions of dollars worth of hyper-leveraged derivatives bets – will be subjected to the higher rates, you begin to understand why the stock market’s arrogant insouciance is worth troubling over. Ben’s Big Problem Adding to Ben Bernanke’s Big Problem is that the plunge in T-Bond prices has been so steep. If the dollar were falling now as well, it would probably trigger a panic, accelerating the fall of both. The fact that the dollar has been doing no worse than holding its own for the last month or so suggests not only that the herd instinct dominates the institutional investment scene, but also that expectations of a eurodisaster have made the dollar the only game in town, at least for

We found sufficient evidence of tiredness and timidity in the S&P futures to justify shorting the market speculatively, which we had already done in Rick’s Picks by buying Diamond puts. In Gold, we identified a midpoint support that subsequently provided a precisely tradable but short-lived bounce. Looking at T-Bond futures, we came up with a few more reasons to think that prices will continue to fall, and therefore interest rates to rise, in the weeks ahead. Copper and Crude looked bullish as all get-out, and we foresaw the possibility of an exhaustion spike in the latter that could take prices to as high $111 per barrel.