Wednesday, December 22, 2010

We own four January 111 puts for 0.97, but there is no point enduring more pain, considering that we were speculating without a price objective to begin with. Accordingly, I'll suggest that you exit the puts on a sell-stop if they trade for 0.47.  (Note: The so far low, achieved Wednesday, is 0.49.)   We'll try to get short again at another, presumably more opportune, time. _______ UPDATE: We exited the puts @ 0.47 off an intraday low of 0.46.   The trading loss was $205 plus commissions.

Over the very near-term, the futures are going to at least 1257.25, the Hidden Pivot target of the pattern shown.  It looks too obvious to short comfortably, but if you are hankering to get long, I'd suggest leveraging a camouflage entry opportunity on the three- or five-minute chart.

There will be no touts or commentary published this Friday (Christmas Eve) or next (New Year's Eve). In addition, the weekly tutorial session originally scheduled for December 29 has been pushed forward two days -- to Monday, December 27.  All those registered for the class will be notified via an e-mail that contains a link to the new class.

The herky-jerky uptrend has become too tiresome to forecast, although it should be noted that yesterday's head-fake, the fifth in as many days, failed to refresh the bull trend on the hourly chart. That would have taken an impulsive thrust above a small peak at 29.645 made December 14 on the way down, whereas the actual high occurred four cents lower, at 29.605.  Bottom-fishing could be attempted tonight at 29.180 if 29.460 hasn't been exceeded to the upside first. My worse-case downside projection for the near term is 28.195, based on the trendline shown in the chart (which we acknowledged earlier).

The hourly chart would begin to throw off sparks if the futures were to print 1412.40 today, since that would create a very robust impulse leg.  Alternatively, a close above a midpoint pivot at 1401.90 would shorten the odds of a follow-through to at least 1442.10, and a two-day close above it would make such a push likely.  The ABC pattern that projects to that number is shown in the accompanying chart.  If the futures fall, however, the first place we would try to bottom-fish, other than via camouflage, is 1370.80, the midpoint support of the bearish pattern shown in the chart.

Just when it looked like the alleged economic recovery couldn’t get any weaker without extinguishing itself entirely, the municipal bond market has gone to hell. And just like in hell, there is no exit – at least none that we can imagine. Here’s why: Municipal and state borrowers who are on the ropes must pay a premium to continue borrowing; this drives their budgets deeper into the red, causing ratings downgrades that in turn raise borrowing costs even more. A vicious cycle, for sure, and it sounds just like much of Europe’s predicament doesn’t it?  Except that, for strapped U.S. cities and states, there is no IMF to pretend to bail them out.  And while Europe’s erstwhile deadbeats, the PIIGS, get plenty of time to work on balancing their budgets through measures of “austerity”  (Merriam-Webster’s Word of the Year, by the way),  U.S. cities and states must bring their budgets into at least a fleeting semblance of rectitude before the beginning of each new fiscal year. We shouldn’t get our hopes too high that this recurring dog-and-pony show will work without eventually causing a taxpayer revolt. If you’ve been following the sordid bookkeeping tactics of such fiscal n’er-do-wells as California, Illinois and New Jersey, you’ll already know that austerity measures that would have been unimaginable just a few years ago have done little to eliminate structural deficits that keep returning like the slasher in a Wes Craven film. The big question is whether the lenders will continue to distinguish “good” borrowers from “bad.” At present they are doing so, charging, for one, the State of Illinois -- the riskiest borrower of them all, with an A1-negative rating -- 1.9 percentage points more than the broader muni market charges for 10-year bonds. For comparison, the borrowing spread for Nevada, which has