December 2010

We’re long 800 shares with a cost basis of 14.27 against eight January 34 puts held for 0.77.  We missed shorting Jan 32 puts against the position on last week's weakness, but we'll stick with the strategy. Continue to offer eight January 32 puts short for 0.72, good till canceled.

We continue to hold four January 111 puts for 0.97.  My short-term bias is slightly negative, since the Diamonds have been working on a bearish impulse leg since Thursday. For now, do nothing further, but please note that the downtrend would need to touch 113.76 today to refresh the bear trend.

Ever so coy, the futures crept up on Wednesday's 29.495 peak Sunday night, only to recede moderately after merely tying it.  This timid action is reason enough to raise the bar, so we'll stipulate that the futures must exceed a second external peak at 29.645 (shown in the chart) before we infer that bulls have taken charge.

The 1396.20 print we were using last week as a bullish trigger can still serve in that role, although as of Sunday night, the futures need only hit 1387.40 to turn the hourly chart moderately bullish.  The implied breakout would be too obvious to afford us camouflage cover, but if it's only by a tick or two followed by a b-c pullback like the one shown in the chart, that could provide a low-risk opportunity for attentive night owls.

We looked at Crude during tonight's Hidden Pivot webinar and found reason to infer that the March contract could pop to as high as 111.66 if the commodity world for some reason begins to spin out of control.  This is one of those situations where one's "beliefs" must yield to the simple logic of a chart.  The midpoint resistance associated with the target, 92.15, has yet to be touched, but if the futures were to close above it for two consecutive days, shorts had better give them wide berth.

Shortly after 1 a.m. Eastern, a potential camouflage opportunity was developing in March Silver. This play would be from the long side, and I have sketched out some hypothetical details in the accompanying chart. If you get on board and the trade survives the stop, thrusting above the 29.495 peak made Wednesday on the way down, hold onto at least a contract or two for a potential home run. ______ UPDATE (10:34 a.m.ET):  No home run this time.  The rally failed to even reach the c-d midpoint of thre pattern, subjecting traders to a 29.035 stop and a theoretical loss of $650.  Why?  The post-mortem suggests that the point 'A'  I used did not exist, strictly speaking, since the pullback that created it was much less than 0.618 of the large k-A segment immediately below it.  The real 'A' here was therefore 28.625, implying that the true entry trigger came at 28.870 this morning, yielding a 29.055 midpint (already exceeded) and a 29.425 target. 

Sellers cracked the 1378.70 midpoint support so hard yesterday that it appears likely the downtrend will continue to at least 1348.50, the '"D target with which it is associated. That implies that a key low at 1352.00 recorded on November 26 will fail as support, although not by much. Since we never want to chisel a bearish forecast for Gold in stone, and because Silver, ever feisty, could decide it doesn't want to knuckle under, we'll allow for the possibility of a bullish reversal. It would be decisively signaled today by a print above 1396.20.

Although we wish Federal prosecutors well in their efforts to root out insider trading, we won’t be too terribly surprised if the five alleged insiders charged Thursday in a high-profile case beat the rap. It’s like trying to root out corruption in places like Kazakhstan or Louisiana, where graft is a way of life. A jury of one’s peers in Baton Rouge probably thinks it’s got better things to do than convict someone for anything less than a capital crime. The five men charged yesterday are all connected to a Mountain View, CA, firm called Primary Global Research. The company advertises itself as an “expert network” firm, which is another way of saying they’ve got some well-placed eyes and ears in the corporate world. For a fee – often, apparently, a large one – the firm would patch clients into a teleconference or bring them face-to-face with someone who would not merely be guessing when he quoted current sales figures for, say, AAPL or Dell.  We lived in Mountain View ourselves for four years and never even heard of the company.  Ahh, if only we’d known! We’ve always wondered how the regulators choose their targets. There is so much “good information” out there, and so many ways to come by it, that ten-thousand prosecutors working for a thousand years would not exhaust the supply of potential felons. In the meantime, the real insiders have at times seemed to have gotten away with murder by operating in the open. Bear Stearns, for instance.  The late, great investment firm served for a while as investment banker to Resorts International, the first company to open a casino in Atlantic City.  At the time, we were working in the options pits of the Pacific Stock Exchange, making markets in put and call options on,

Although Gold precisely reached a well-defined correction target earlier tonight, Silver has been reluctant to follow. The 28.615 pivot remains valid nonetheless, but bulls would take control if they can pop the futures above 29.645, equal to a small peak made Tuesday on the way down.  Odds of this occurring would have been better if the rally that apexed earlier that day had gone just an inch farther, exceeding  a small but important "look-to-the-left" peak  at 30.00.