May 2011

Late Sunday night, the futures looked bound for 1309.00, a Hidden Pivot support that can be bottom-fished with a 1309.25 bid and a stop-loss as tight as 1308.50.  If the stop is hit, though, look for the weakness to continue down to at least 1303.25.   We continue to hold a single-contract short with a 1358.25 stop-loss and a cost basis adjusted to 1363.00 after we took a partial profit on the original trade.  We're swinging for the fence on this one and plan to forego a trailing stop until such time as there is $5000 of theoretical profit per contract in the position.

Because stocks and commodities sometimes fluctuate for reasons too complex to speculate on let alone predict, we often look to our charts to tell us what diligent guesswork and informed reasoning cannot. At the moment, our attention is riveted on the 10-year Treasury Note, which has been flirting with a major rally target, and by implication, a potentially very important low in lending rates. If so, the implied shift in Treasury paper from bull market to bear is one that we cannot afford to take lightly, since nothing would hasten the country’s descent into economic depression as certainly as the ratcheting up, even slightly, of key lending rates.  Try to imagine the impact of this on, for one, a residential real estate market that has already shed a third of its value since the beginning of the Great Collapse several years ago.  Commercial real estate would be in fatal jeopardy as well, since the accounting tricks that have been used to mask its true condition rival in deviousness even those the Federal government has used to conceal the fact of America’s bankruptcy. We have been predicting here for years that home values would ultimately decline by 70 percent and that the collapse in vacation properties would be even worse, hitting 90 percent.  However, given the unprecedented weakness of these markets in the face of a failed multi-trillion dollar monetary stimulus and a dead-cat bounce in the stock market that has taken more than two years to play out, one shudders to think about how quickly the final phase of the collapse would unfold were the flimsy support of artificially suppressed interest rates to be removed. Watching Dollar Closely We first glimpsed the gathering storm in T-Notes during one of the impromptu webinars that we conduct from time to time during

Early Thursday evening, bullion and the broad averages were in synchronized tedium, suggesting that the action into week's end will be a snooze. I have nonetheless supplied some benchmarks for determining whether things might be turning interesting.

A whole week's worth of upward ratcheting has failed to exceed even the lowest of several key peaks on hourly chart, implying the euro is under distribution.  A print today exceeding a high at 1.4413 recorded on May 10 would change that, but otherwise we should expect to see buyers give up the ghost as early as next week.

Silver's hourly chart, like Gold's, has entered a duel that augurs flaccid price action for at least another day or two.  Bulls could change that with a print at above 36.680 today, however.  That's a Hidden Pivot and my minimum upside target if higher prices are coming;  however, just a tad better -- 36.930, to be exact -- would leave bulls in good position to beat up on the bad guys come Sunday night.

Gold's highs, lows and impulsive thrusts in recent days have much resembled those of the Dow Industrial Average but for one thing:  While the Dow has managed to exploit the helpful push by moving moderately higher, June Gold has merely gone sideways, goading bulls and bears into a tiresome duel.  Looking ahead, buyers will need to achieve 1510.70 today to go on the offensive. Traders looking to bottom-fish should try 1479.90, stop 1479.10.  It is the somewhat unintuitive midpoint Hidden Pivot of the pattern shown.

The thimble-rigging, conniving spook-job exposed by yesterday's giddy opening bar failed to get it past Monday's 12643 high, adding to the suspicion that buying interest is nil, even among erstwhile panicky shorts. Since there is even less interest in selling, however, we should expect DaBoyz to continue to hold this gas-bag aloft until the next crumb of short-squeezable "news" hits the tape.  Bears are advised to continue hibernating peacefully unless 12719 is exceeded to the upside. If you're curious as to why but don't subscribe, click here to access all of Rick's Picks features and services free for a week.  This includes access to a 24/7 chat room that draws combat-hardened traders from all over the world.

We'll stand pat with our short position, tuning out the unwatchably tedious process of accumulation/distribution currently under way. The futures are headed either slightly higher or much lower, but we are all but certain in theory to book a gain regardless of which. We went short two contracts at 1358.25 but now hold one with an effective cost basis of 1363.00.  Forecast for Friday:  Like, who cares?

[Crude oil is just one of many things the world is running out of, says our friend Tom McCafferty, a frequent contributor to Rick’s Picks, in the guest commentary below. Never one to pass up an opportunity, Tom, author of Options Demystified and numerous other books on trading, suggests using puts and calls to manage short-term risks while investing for the long haul in “real entities that produce real products.” RA] We are all familiar with all the hullabaloo in recent years over Peak Oil.  Dozens of books and websites devoted an enormous about of space to scaring the pants off of us. In a few years, we would be all be sitting in a dark, cold room without access to “Dancing with the Stars”.  Man …that will be a bummer. Before you get your blood pressure back under control, I’m here to tell you the Peak Oil is just the beginning. The World is facing more peaks that it can handle in the next few decades. For example: •  Peak Water:  The World does not have enough water for crops or the increasing population.  Every wonder why China was so aggressive to control sleepy little Tibet?  Guess where the origins of the five great Chinese rivers are located?  Or why it is importing so many tons of soybeans?  When thinking about food importation, think of it as just a substitute for importing water.  China is not alone.  In India, the Green Revolution is now a disaster. •  Peak Population:  How many people can the World sustain?  I’m afraid we are going to find out the hard way.  More specifically, how many senior citizens can it take care of … think of our Social Security system and then think of countries like Russia or Italy that have an even more