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From the monthly archives:
December 2010
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The Dollar Index has picked up support from some too-obvious lows made a week ago, but the damage was done earlier in yesterday’s session when DXY crashed the 79.25 midpoint support of the pattern shown. This implies more slippage over the near term to at least 78.10, the midpoint’s ‘d’ sibling.
Silver appears to be breaking free of the strong gravitational pull of the trendline I’d used to project a worst-case low for the correction begun a week ago. To align the forecast with the one out today for February Gold, we’ll use the coordinates shown in the chart, stipulating that a two-day close above the 30.150 midpoint is needed before we infer that its sibling 32.285 ‘D’ target has become an odds-on bet.
March Gold is doing this evening what it couldn’t all day Monday: i.e., pushing above — oops, make that spiking above, since the futures just popped $1.20 seconds ago — an external peak at 1401.50 that I’d noted here previously. In the same leap, they’ve breached a second “external” peak at 1405.40, suggesting the pressure will be on the bad guys overnight. We should focus on a midpoint resistance at 1412.40, a slightly higher Hidden Pivot than the one given here yesterday. Its provenance is shown in the accompanying chart. While a breach today would be constructive, we’ll stipulate that the futures must close above 1412.40 for two consecutive days before we infer they’re on their way to its ‘D’ sibling at 1452.60.
I’ve established a tracking position for your further guidance, since some subscribers are evidently still long. Ahead of EK’s leap, I’d touted the January 5 calls when they were offered for 0.26, so we’ll assume four still held after cashing out of four more at 0.54 (that’s midway between 0.26 and their so-far post-rally high of 0.83). That gives us an effective cost basis of -0.02 for each of the four puts we still hold, so we’ll just call them freebies. FYI, the same pederasts who were accumulating stock for five weeks before They sprang a bear trap have been letting the stock fall back so that They can steal more of it from nervous widows and pensioners. We’ll do nothing further at the moment, since we’ve got at least 7-10 days to roll out of January premium before it starts to flatline. _______ UPDATE (2:27 p.m. ET): EK is moving out of a consolidation, presumably bound for a minimum 5.82 once it has cleared the midpoint resistance at 5.44. _______ FURTHER UPDATE (December 20, 11:123a.m. ET): Kodak has popped to a high today of 5.88. I’ll suggest exiting two of the four Jan 5 calls that remain for 0.95 or better. That will give us an adjusted cost basis of -0.97 for the two calls that remain.
Pretty amazing. The futures had all night and a full day to rally just seven points to a Hidden Pivot target, and yet they somehow failed. More amazing still is that they will likely continue higher in the days and weeks (months?) ahead despite mounting evidence that there is almost zero buying interest. This seeming paradox exists because short-covering is always lurking in the shadows to pop shares higher. It usually take a little news, any news, to trigger a squeeze, but yesterday there was no news whatsoever. (Granted, Brett Favre won’t be starting tonight against the Giants, but we wouldn’t have expected that story to move the markets.) The 1250.25 target remains valid nonetheless, and you can try shorting there with a stop-loss as tight as 1.00 point. However, it is a sign of incipient (and presumably short-lived) weakness that the futures died more than three points shy of an easy target. The pattern with which it is associated is shown in the accompanying chart.
(The following essay by Cam Fitzgerald, an occasional contributor to Rick’s Picks, drew nearly three dozen responses since being posted Sunday evening, so we are letting it run for another day. Cam sees a world on the brink of financial, economic and political disaster. If the global economy and trade were to collapse – hardly a longshot bet at this point – he notes that there is no “Plan B.” We had better come up with one soon, says Cam, or we could all wind up wallowing in feudal darkness for decades. RA)
The T-Bond market is groaning. Like a great, creaking ship lurching to one side, the sounds of shifting portfolio positions have grown louder and more ominous by the hour, accompanied by the clamor of bailout pleas and a mad scramble for the life rafts. Rates are on the rise and prices falling. Bonds are dead, long live Bonds!
The pirates off the stern, meanwhile, smell blood and are sizing up the opportunity to take down one of the fattest, easiest targets they have seen in all their sorry lives. They know they can take this craft down with words alone. If only they can spread fear above board and on the decks, they know the crew and its passengers will rush for safety, setting off a panic that sees all hands clinging to the » Read the full article
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High-Diving Investor Climbing, Climbing….
by Rick Ackerman on December 15, 2010 2:54 am GMT · 26 comments
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 portfolio managers who harbor a congenital distrust of bullion. Perhaps they think higher interest rates will put the kibosh on gold and silver? No question, tighter money will put downward pressure on precious metals. But there are a score of big, sovereign buyers who will keep buying bullion no matter what the returns are on paper. Can you blame them?
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