Friday, January 14, 2011

Silver has breached an important midpoint support in off-hours trading and Gold is close to doing the same. The bearish implications thereof are spelled out in today's touts, which include intraday charts to illustrate.

I've identified an important midpoint support in Gold, but the picture looks slightly different in Silver because the pattern I've used to project a target starts with a rather well-defined one-off point 'A' (see chart).  One target or the other is likely to prove correct, but it is a bearish sign that Silver's 28.565 midpoint has already been exceeded (albeit by just four cents so far). Please note that a close beneath the support would portend more weakness over the near term to as low as 27.285.  Alternatively, it would take an upthrust to 29.910 to turn the intraday charts bullish. _______ UPDATE (11:23 a.m. ET):  The selloff has continued, overrunning the midpoint support. Expect it to continue down to at least 27.285, or to a maximum 26.895 if any lower. The midpoint associated with that last number is 28.370, so a rally to it should be viewed as a belated opportunity to get short via camouflage.

A day-long snoozefest featured the obligatory price hump early on in the session.  February Gold went on to peak at 1392.90 -- exactly $1.60 above the forecast high.  From there the futures have fallen sharply, and presumably gratuitously, touching a low of 1369.10 at 4 p.m. ET.  The key number for today is the 1357.00 midpoint support of the pattern shown.  If the futures close beneath it, that would be telegraphing more downside to as low as 1321.20, its 'd' sibling.  FYI, the 1357.00 target can be bottom-fished with a stop-loss as tight as four ticks off a 1357.10 bid. _______ UPDATE (11:11 a.m. ET):  The futures have come down hard, breaching the stop with a so-far low at 1356.10 that would have produced a theoretical loss of around $50.

In the chat room earlier this week, I recommended buying Feb 115 puts if and when DIA hit a rally target at 117.61. They spiked to 117.65 on Wednesday, so I will establish a tracking position of four puts @1.20 for your further guidance. (The low on the puts was 1.18). There were corresponding short recommendations in the E-Mini S&P, which fell three ticks shy of an 1185.25 target; and in the Mini-Dow (YM), which failed by 29 points to reach its 11759 target.  Concerning our put position, I'm going to suggest closing out two of them using a 1.42 offer, good-till-canceled.  Make it one-cancels-the-other with an order to close out all four puts at-the-market if they should touch 1.20 again. ________ UPDATE: We scratched the puts for no net gain or loss when the Diamonds began the day with renewed strength. The puts blipped very sleazily up to 1.36 on the opening, as put options in a bull market are wont to do, but that wasn't quite good enough to take us out at a profit. We'll continue to short every potential rally top simply because we can -- more or less painlessly.

An essay by MarketWatch's Brett Arends on the collusion between Government and Wall Street is the must-read of the month. Click here to access the superb essay from which the following was excerpted: "This was the year America finally took on the power and greed of the Wall Street banks. "And the banks won. "They dodged the bullet of real reform, probably for all time. They bounced back to post huge profits, helped by legal theft from the middle class. They completed their takeover of both political parties — and bought themselves a new Congress even more pliable than the old one."

We were hoping a bell would ring to signal a decisive end to the Mother of All Bear Rallies, now in its 22nd month, but it looks like we’ll have to settle for the next best indicator of The Top -- namely, Facebook’s IPO, prospectively the hottest ticket on Wall Street since Time-Warner merged with America Online. Who would have believed, in these harrowing economic times, that investors would practically trample each other for a chance to buy shares in the Web’s version of the Brooklyn Bridge?  That, evidently, is what the Street’s glib promoters have in mind when Facebook's IPO eventually happens: a buying stampede that will make Google’s initial public offering in 2004 seem as subdued as a PTA bake sale. However, there are so many sharks circling this deal that even if it raises the $55 billion or more that is expected, it will be just chum floating on the tide. Meanwhile, with no IPO even scheduled yet, how enthusiastic are investors? Extremely. A poker buddy of ours who attended a NYC investment banker’s sales pitch on Facebook the other day returned to Colorado with the religious fervor of someone who’d been to the Sermon on the Mount. Because the IPO is unlikely to materialize before 2012, however, that could make it difficult to determine exactly when the hubris on Wall Street is peaking, setting stocks up for The Big One we've all known is coming.  If and when the IPO happens, you can bet that the public offering being hatched by Facebook’s Machiavellian founder, Mark Zuckerberg, and the Svengalis at Goldman Sachs will be the Last Big Deal of this era. Goldman stands to reap a fortune if the IPO comes off as expected – an awesome feat, considering it will have been achieved when the U.S. economy was deleveraging more