April 2011

Yesterday's whacky action saw SLV spike to within a dime of our short offer.  I'd given a rally target at 42.68, but re-measuring the pattern has refined it to 42.60.  There are too many variables to provide a "safe" entry strategy Monday night for Tuesday, but I'll provide a speculative one nonetheless for anyone feeling bold:  Bid 1.26 four four May 41 puts, stop 1.12.

My choice of a point 'A' is arguable, but if it works, the futures should fall to at least 1276.25 before getting good traction. That's a Hidden Pivot support that can be bottom-fished with a stop-loss as tight as three ticks. The 1290.00 midpoint is worth little to us, however, since it lies just a tick from the obvious structural support of yesterday's v-shaped bottom.  Bears should give benighted buyers wide berth if the futures should turn higher from somewhere above 1290.00 and subsequently make it past 1311.50, the first 'external' peak a rally would encounter on the hourly chart.

We stand foursquare with the lunatic fringe on the "birther" question, and we commend Donald Trump for pursuing it like a pit bull.  It's pretty obvious he's onto something, even if Fox's Bill O'Reilly doesn't believe there's a story here.  However, we doubt O'Reilly has a glib rebuttal to the investigative piece posted at American Thinker.  Click here to access it.

And now we learn that Standard & Poor’s, the same unprincipled hacks whose grossly inflated triple-A ratings made America’s real estate boom and still-busting bust possible, has downgraded the USA itself.  Or to be more precise, their long-term outlook fell from “stable” to “negative” – a Kremlinesque way of hinting that an actual downgrade from AAA is possible if the U.S. doesn’t get its fiscal house in order (as though that were even possible, given that the Federal debt is $14.3 trillion and climbing, and that the economy is on a permanent respirator). And whose payroll is S&P on, we wonder?  Until yesterday, we thought they were so busy putting the screws to Europe’s financial cripples that there wasn’t time or manpower enough to pore over America’s books. Now, it would appear, they’ve found actual fiscal problems to worry about even if the real worries eupted like Vesuvius three years ago. And another thing: Whenever they slam the PIIGS by taking their credit ratings down a peg or two, it is usually to buoy the U.S. dollar that day so that Little Timmy Geithner’s pep talk at some Rotary Club luncheon gets good press. Whatever the reason for yesterday’s downgrade – about as shocking to millions of Americans as the revelation that Liberace was gay – it was fun to watch the bond market react. Or rather, to not react. T-Bond futures ended the day down a few measly ticks, although the obligatory swoon on the “news” allowed predators who live off such volatility to shake down the rubes. The June contract plummeted more than a point-and-a-quarter on the opening bar, then spent the rest of the day making fools of those who had bailed out at the lows. Nice to see the bonds acting conflicted for a change. On

The futures have bottomed Sunday precisely two ticks from where they ought to have (see chart), so traders should come to the task with a cautiously bullish bias.  Seekers of camouflage should try the five-minute chart, which as of around 1:10 a.m. Sunday was creating untradable, 'dueling' impulse legs.  There was nonetheless a more speculative opportunity in prospect if the futures were to fall to 1.4342 -- a minor midpoint support -- without having exceeded 1.4369 (aka 'c') to the upside first. _______ UPDATE (8:47 a.m. EDT): The futures have breached Hidden Pivot support overnight and appear headed toward the conventional, "structural" support afforded by the 1.4222 low recorded on April 7. _______ FURTHER UPDATE (1:47 p.m. EDT):  The June Euro has been the slave of Hidden Pivots lately days, having taken another leg down to within a single tick of the 'd' of this pattern (30m): A=1.4482 (April 15, 3:30 a.m.); B=1.4280, C=1.4338. If the futures should fall anew, try bottom-fishing at 1.4093 (A=1.4482, B=1.4243, etcetera...) with a very tight stop-loss.

It wouldn't take much of a rally to create a bullish impulse leg of daily-chart degree, shortening the odds of an eventual push to as high as 126^11 over the next four to six weeks.  Specifically, if the futures exceed March 31's peak at 120^31  and then continue higher, surpassing 122^08 without a significant retracement, that would strongly imply that last week's low at 117^28 was an important one.

We should heed a Hidden Pivot at 1518.70, since it could create a top of at least minor degree equivalent to the target I've flagged in May Silver.  That said, a runaway move to the upside could hit 1581.20, a Hidden Pivot whose midpoint sibling at 1446.10 got demolished two weeks ago. The first evidence we'd have that Gold is  capable of such a burst would become apparent on an easy move through 1518.70.

The rally pattern shown in the chart suggests a stumble at or very near 42.68.  Let's try to get short there, buying four May 41 puts if and when the underlying vehicle gets within 5-8 cents of the target.  If the stock tops where expected and comes down hard enough to allow you to sell the puts for 40 cents more than you've paid, close out two of them. Since there's a chance that the stock will hit 43.32 if it blows past the first pivot, plan on buying four additional puts at that level. _______ UPDATE (11:35 a.m. EDT): A rally spike in the opening minutes of the session carried to 42.50 -- not quite high enough to get us short.  The order is still valid, but, for your information, there was no easy way, even drilling down to the two-minute chart in search of camouflage, to get  short.

The 43.610 target given here last week remains valid, although 43.910 is possible if the futures exceed the lower number by more than a two ticks. The implications of these numbers will be different for each of you, but I'll note once again that the target range looks like a compelling spot for a pullback or even an intermediate top, so beware. _______ UPDATE (10:30 a.m. EDT): The futures have gyrated wildly this morning after peaking at 43.56, a nickel shy of my target. Caution is still advised.