March 2011

Technical considerations aside, the Indoos look like they are getting ready to blast off for the relatively short thrust it would take to achieve new recovery highs and extend the Mother of All Bear Rallies into its 26th month.  Looking at the chart, the impending "liftoff" is so palpable, in fact, that we should view it with every ounce of contrarian skepticism we possess.  Practically speaking, this means we'll be looking to get short -- via camouflage, if possible -- at any Hidden Pivot worthy of the name. Stay tuned!

[The commentary that follows elicited a deluge of fascinating responses, and so I am letting it run for a second day.  Frequent contributors to the Rick's Picks forum were asked where the U.S. economy would be in five years. Below, Mario Cavolo, an expatriate whose business is based in Shanghai, says Chinese wealth is clamoring for bargains in the U.S. and that a falling dollar will bring enormous Asian investment to our shores, infusing the U.S. economy with new vitality.  The bad news is that large swaths of the American middle class will be devastated by the shifting economic landscape, unable to take advantage of the opportunities that voracious demand from foreigners will create. RA] On treating the theme Rick put forth for this recent series of contributing articles, it would be best to start with the fascinating and accurate point he makes that the “jig is already up,” as opposed to being a situation we think we are still attempting to put off.  There are far too many complex pieces to the puzzle across not only America but the entire global markets, so intricately interconnected, making it foolhardy to suggest their status or direction. I would suggest we can agree on a few core points giving us a sense of where we will be in five years and with that in mind, let’s say we have some very good news and some very bad news. No matter how many points we cover, there will be dozens of other points and counterpoints not touched, requiring a 600-page book to cover it all respectably. Yet, with regard to the core points put forth in this treatment, each of us needs to consider what possible moves, what choices, what adjustments he or she might make looking forward to their future from today -- not as being a

The hubris and bold mindlessness attending this rally is a theme I've already beaten to death, so let's focus for now solely on the "technicals" (which is what we always do anyway).  With yesterday's short-squeeze in the final moments of the session, the futures exceeded a 1313.25 pivot where "key resistance" had been precisely anticipated.  Now, we should shift our gaze to the next, 1324.50 -- or to 1334.25 if the lower number is breached by more than three ticks.  That last Hidden Pivot, the end of the line for targets derived from the lesser charts, can be shorted with a stop-loss at 1335.25.   Please note, however, that there is an equally compelling pivot (see inset) at 1336.50, but it is too close to mid-February's important highs to yield a trading edge.  Whatever occurs, the cluster of hidden resistance points begs to be shorted, preferably using camouflage.

Bullion looked lower Monday night, but I've provided bullish trigger thresholds in Gold and Silver in case the good guys are able to turn things around. The weakness should be viewed as searching for a good launching pad.

If a minor midpoint support at 1414.10 gives way, look for this short-term weakness to continue to at least 1403.20, a Hidden Pivot support that you can bottom-fish with a stop-loss as tight as three ticks.  However, if the bad guys romp, obliterating the support and another at 1399.40, 1386.50 is probably the worst they can do for now.  As of around 3 a.m. EDT, the futures were in an upward correction that could go as high as 1430.20 if it gets past the midpoint at 1424.10.  This is predicated on the 'C' low  at 1418.00 remaining intact.

We should know soon whether the selloff in the final hour was prelude to a bear trap, since the weakness has tapered off to nothing Monday evening.  If the so-far moderate decline merely provides running room for DaBoyz to apply the ol' short squeeze, you should infer they are capable of moving this sludge-bag to as high as 1324.60 within the space of 90 or so minutes. In the process, key resistance would occur at 1313.25, a Hidden Pivot midpoint, as long as 1301.75 (aka point 'C') has not been exceeded to the downside.

A minor, corrective rally looked bound for 1.4096, a midpoint resistance, but if the futures get past it they should be presumed bound for at least 1.4141, its 'd' sibling. If this occurs, it will brighten the prospect of a further ascent to as high as 1.4379 over the near term.

All of yesterday's gratuitous chop took place beneath a not-very-initimidating peak recorded on St. Patrick's Day, casting doubt on buyers' resolve -- the moreso because they had the wind at their backs from the central banks' interventions against the yen.  I'm inclined to write off any seeming strength in the dollar as a flash-in-the-pan, but we should nonetheless remain open-minded to the possibility of a modest pop above 76.46 that would reinvigorate the hourly chart.

From analyst Daniel Greenfield of the SultanKnish blog, here's a trenchant analysis of why the West cannot "save" Muslims by overthrowing the tyrants who rule them:  "But as we write and read, talk goes on of how to save 1 billion Muslims from themselves. Removing their tyrannies, some cry. But what will they replace them with? More tyrannies. Governments reflect their peoples, not perfectly, but as broken mirrors. No tyrant who does not reflect what his subjects prize in this world can long endure upon his throne. If 1 billion Muslims wanted to be free, they would be. The tyrants are expressions of their condition, not repressions of their moral will. The Muslim world does not differ on whether there should be tyranny, but on what manner of tyranny it should be. "  For the complete essay, click here.