May 2011

Our end-of-world date came a few days later than preacher Harold Camping’s, but it looks like we were both wrong.  Unlike Camping, we were not so much concerned with the wrath of God -- which, one fervently hopes, has been amply vented by the spectacular irruption of natural disasters visited upon the planet and humankind lately. Rather, our chief worry concerned the potential top that we saw forming in the 10-Year T-Note.  Not exactly the Rapture, let alone Judgment Day, but perhaps troublesome enough to set the world’s financial system on course for its own day of reckoning. For if prices for Treasury paper are indeed topping, and yields therefore bottoming, then scores of millions of debtors are about to be squeezed to the brink of insolvency. Perhaps we needn’t have worried. Yesterday, the June 10-Year T-Note futures finally hit the 123^21 rally target we’d proffered weeks ago by way of a Rick’s Picks trading “tout.” Then, in apparent defiance of natural law and the black artfulness of our proprietary Hidden Pivot analysis, they continued higher.  Not much higher, to be sure, but higher enuf to suggest that the preference of buyers for “safety” over risk is unlikely to abate over the near term. Bailing Out of Short Well in advance of this by-now fabulous surge in Ten-Year paper, we’d told subscribers to get short at the projected top, but with a very tight stop-loss of five ticks.  We reiterated this cautionary note in the chat room yesterday after a phone conversation we had with our friend Doug B, an occasional contributor to this site. Doug mentioned that the good folks who brought us QE1 and QE2 were contemplating something a little different for QE3 – i.e., a 1950s- style targeting of rates on the 10-Year Note. Presumably, this would

Writing on the failed American state, and a failed presidency, Conrad Black is as sharp as Mencken in this National Review essay.  Click here to access it.

Bullish touts today for Gold and Silver had been inspired by their feistiness last night, but the rally has fizzled even with a weak dollar as backdrop. The selloff is very mild so far but bears watchng nonetheless, since the currency environment had seemed conducive to strength.

We are short from 1363.00, shooting for a gain of at least $5000 per contract. That means we'll let this rally run against us, notwithstanding that we came within a point of predicting the low of the 55-point selloff that produced yesterday's bottom. At the close, the futures appeared headed to 1333.50, subject to midpoint resistance at 1324.75.  If you have no position, you can short the higher number with a three-tick stop-loss.

The stock looks like it's setting up for a 30-point dive to a Hidden Pivot support at 479.84.  The so-far low of a correction from 643 that is now entering its fourth month is 513.40, just 62 cents from the Hidden Pivot midpoint at 512.78.  'Camouflage' shorts are advised, but keep in mind that you'll need to be on charts of 15-minute degree or less in order to nail the minor swings with the to-the-penny-accuracy that successful 'camo' trading requires. In any event, we'll look to botom-fish if and when GOOG reaches the target. _______ UPDATE:  We'll put this trade aside for now, since the stock is currently rising, evidently disinclined to breach the midpoint support.

Just like in the good old days, July Silver was rampaging Wednesday night, extending the already steep rally of the last two days with a heartening second-wind burst. Still, we need to take into account that this surge is occurring with no resistance peaks to impede it on the hourly chart all the way up to 39.470. Expect a test of that high soon, but I'd still need to see a print above 39.565 -- make that 39.955 for good measure, and the sooner the better -- before I can sound the all-clear.

A rally to exactly 1536.30 seems only slightly less likely at this point than the next sunrise, but the June futures will have to do a tad better, pushing past that Hidden Pivot resistance by at least a point or two, to keep the rally feisty.  Even better would be a thrust that clears the 1543.50 peak noted here yesterday, since that would reinvigorate the hourly chart with the creation of a new impulse leg. It would also leave in the dust a crucial, 1528.70 midpoint mentioned here earlier.  One other resistance point to watch out for: 1535.40 (A=1462.50 on May 5, hourly).

With just a little more oomph, Silver Wheaton will create its first bullish impulse leg  in more than six weeks on the daily chart. To be more precise, it will take a stab above a 37.72 peak recorded May 10 on the way down to do the trick.  That would make for clear sailing to 41.805, and thence open a path to its 'D' sibling at 51.18.  We hold 300 shares @ 42.01 against three June 40 puts with a 4.00 basis.  Continue to offer three June 40 calls short for 3.10. This would lock us into a risk-free "conversion" while recouping a substantial piece of a currently unrealized loss of around $1800.

Yesterday’s rally in the broad averages presented a dilemma for us, since we’ve been short the E-Mini S&P futures from 1358.25 and had a paper profit of $2800 per contract at the intraday low.  Even more problematical was that we fully expected the futures to reverse direction from within a hair of that low, and to do so sharply enough to warrant initiating a long position there.  Earlier in the week, with the futures trading around 1315, we had advised subscribers to look for a bottom at exactly 1303.25, and to bid there with an extremely tight stop-loss, at 1302.50. Lo, the futures fell in the wee hours Wednesday morning to 1302.25, stopping us out for a minuscule loss before they turned and ran 20 points higher into day’s end. Should we have covered the short position, since we’d anticipated the reversal? Ordinarily, the answer would be “yes,” since we adhere obsessively to a risk management strategy that holds risk:reward constant at 1:3 in each and every trade, from entry till exit. In this case, however, we had resolved to let the position run until such time as it produced a theoretical gain of at least $5000 per contract. We are sticking to that plan for now, come hell or high water – swinging for the fences, as it were, even if it means giving up the $2800 of theoretical profit that we had within our grasp at yesterday’s lows. Anticipating yesterday’s run-up, we had sought to “protect” our short position in the E-Mini futures by doing a trade “against-the-box.”  To make this strategy easier, we suggested buying, not E-Mini futures against those we are already short, but call options on QQQ. Specifically, we recommended buying June 56 QQQ calls if the underlying vehicle came down to a Hidden Pivot