July 2011

Hidden Pivots aside, Gold looks like it's building a ponderous top that can only be corrected in either of two ways: a dramatic swoon, or a lengthy dirge sideways. Regardless, we'll be watching for signs of impending drama on charts of lesser degree, since that's where any important mood change would first be signaled. Most immediately, a gnarly pattern on the five-minute chart (see inset) suggests that moderate weakness impends today, predicated on a Hidden Pivot support at 1580.20 if its midpoint sibling at 1586.30 gives way. Neither place looks especially appealing for bottom-fishing. Alternatively, bulls would be back in charge of the short-term picture if the futures top 1601.70 today.

It is at times like this, when I am unable, even, to imagine stocks going anywhere but (much) higher, that they usually turn.  If they do so today, although I doubt the selloff will go far enough to alter the 1388.75 target given here earlier, it may suffice nonetheless to send traders home over the weekend with just a mote of doubt.  In any case, the futures need only rally 10 points, surpassing the 1354.50 peak recorded on July 7, to set up a short-squeeze on Sunday. If they fail to do so, presumably only briefly, it will be because the bullish scenario has become too pat to work.

Where would you invest $76 billion if you had it?  That’s the size of Apple’s cash hoard at the moment, and it would appear that they have no better idea of what to do with all that money than you or I.  Apple isn’t the only company with this “problem,” if you could call having a mountain of spare cash in the bank a problem. According to Standard & Poor’s data reported by the Wall Street Journal the other day, the 500 largest U.S. companies alone currently hold cash or cash equivalents that totaled $963 billion at the end of the first quarter, up from $837 billion a year ago.  Tech companies in particular are glutted with cash they apparently cannot use. Microsoft’s got $60.9 billion sitting around; Google, $39.1 billion; and Cisco, $43.4 billion. What’s a company to do? Traditionally, high-tech companies have shunned paying dividends because shareholders expect the companies to use the cash more aggressively for growth. But the likes of Apple and Google have been growing plenty fast without dipping into their so-called war chests. Come to think of it, maybe they should start a war with China, Europe or Brazil.  Hasn’t war always been good for business? As for the excuse that they need to hold cash in case a great acquisition opportunity comes along, Apple, Google and numerous other NASDAQ world-beaters could borrow all they want for next to nothing, at any time.  And so they have been. We reported on the surge in corporate borrowing a while back, mystified as to why a corporate sector with nearly $2 trillion to spare was nevertheless borrowing hand-over-fist. The ostensible reason is that the money can be borrowed for nearly nothing – and so, why not?  Indeed.  Even so, we can’t help thinking that a wave

The E-Mini S&Ps are four points in-the-green early THURSDAY morning, but there's 15 points more upside before they run into a Hidden Pivot with the power to resist the tide. If the resistance fails, however, it would be signaling a possible 400-point rally in the Dow next week.

Our minimum upside objective is 1340.00, the Hidden Pivot midpoint of the pattern shown.  Although a stall there could hint of serious trouble ahead, a two-day close above the pivot -- the outcome that I expect due to the power of the impulse leg from which the target was derived -- would be warning shorts to brace for a possible follow-through to 1388.75 (a.k.a. point 'D').

Early Thursday morning, the futures were acting much as they did the night before, chopping sideways in bullish fashion just above a midpoint resistance. The Hidden Pivot lies at 39.710, and the fact that it has given way portends more upside over the near term to its 'D' sibling, 41.205.  This is all pretty straightforward, but we'll have to wait and see whether the futures play it by-the-book. Night owls should look for 'camo'  cover amidst the cluster of peaks between 40.285 and 40.550 that were etched on the lesser charts Tuesday on the way down.

It's a challenge to keep bullion touts up-to-date, what with all of the gratuitous ups-and-down that have turned a docile bull market into a daily Donnybrook. The 1652.00 target given here earlier is the one we should keep in mind, but as far as the day-to-day, we'll need to compose each tout using a fresh slate, as though nothing interesting had happened the day before. For today, that approach begets us the 1616.80 target shown, subject to midpoint interference at 1598.50.  That Hidden Pivot resistance is not putting up much of a fight, the futures having exceeded it in after-hours trading by 3.90 points. My bias is therefore bullish; however, night owls will not find much cover using the peaks made Tuesday on the way down, since they are all of a piece with the primary top at 1610.70.

We searched Google News in vain Wednesday afternoon for the latest, presumably sordid, developments in the U.S. budget crisis, finding instead only stories about the lethally hot weather that has blanketed much of the U.S., the apparent death of three hikers swept away by a waterfall at Yosemite, and yet one more setback between players and the NFL.  Google’s story-of-the-hour concerned an unlikely Internet hero, Rupert Murdoch’s wife, Wendi Deng, who has come to the media baron’s defense with the ferocity of the proverbial house ablaze. Murdoch’s chief offense, as far as we can tell, is not the sleazy tactics his reporters used to ferret out very private information on certain people, but the blatantly political uses to which he has put some of that information. Not that every politician in the U.K. is his sworn enemy.  Like any businessman who owns a newspaper, Murdoch has played favorites, and it is presumably only those whom his sensationalized reportage did not favor who have mounted an all-out assault on his publishing empire. There are rumors that Soros is behind it all, but if this is true, he is even cleverer and more devious, although not more treacherous, than we’d given him credit for.  It’s one thing for Soros to plot the destruction of a currency, but quite another for him to surreptitiously attempt to maneuver one’s formidably-armed enemy toward ruin.  If Soros has indeed been a prime mover against Murdoch (as he may well have been against Fox network’s fallen matinee idol, Glenn Beck), it is unlikely to be revealed in the explicit manner of accusations that Murdoch brings against him.  Rather, we should expect certain details harmful to Soros’ reputation and his far-flung business empire to dribble out over time.  Moreover, because Soros keeps such a high-profile, it shouldn’t be

The emphasis during this session was on spotting camouflage opportunities and steering clear of traps in real-time charts for Gold, Silver, Corn and the E-Mini S&Ps. Although it will nearly always be possible to force a long or short trade in some time frame, we can reduce stress and effort by initiating trades only when they are based on impulse legs that conform strictly to our rules. In particular, we should expect to find the best – and easiest – trades at swing highs and lows that have been signaled on charts of higher degree. In all instances, finding the first such signal amidst the panic, fear and uncertainty of others will afford the most trouble-free path to success.