August 2011

Having legged into the September 42/46/50 call butterfly spread four times for 1.04 over the last few weeks, we have a chance to make as much as $1184 if the stock is trading around 46 when the options expire on September 16.  The position would be profitable in theory with the stock trading anywhere between 43.04 and 48.96, but we lose outside of that range, although no more than $416 total no matter what.  Do nothing further for now.

Ever since the watershed high near $50 was recorded in early May, bulls and bears have been duking it out within a $10 range whose peak (basis the September futures) was 42.295. The bearish case carries more weight, however, for one reason:  buyers have so far failed to surpass the look-to-the-left peak at 42.330 notched on May 4.  Just a nickel more of upside on August 4 would have done the trick, but buyers instead showed timidity that has weighed on Silver since.  If and when they get past that peak -- and it looks like a coin toss at the moment, technically speaking -- it will be sunshine and lollipops once more for bulls, but until then they will face possible jeopardy down to 37.225, a Hidden Pivot midpoint, or even to its 'd' sibling at 34.590 if it's breached for two consecutive days on a closing basis.

A weak opening Sunday evening has knocked $10 off the price of December Gold, generating a so-far low at 1730.80. To turn things around on the hourly chart, bulls would need to achieve a print at 1761.10, a single tick above a small peak recorded Friday on the way down. Failing that, however, the futures will face downside risk over the next day or two to 1706.80, or even to 1687.90 if it gives way. The provenance of both targets is shown in the chart, and it is the implied symmetry of a pattern yet to play out that gives them credibility.

The rally target at 1227.75 that was in play in Friday is still in play. As I'd noted earlier, choppy action has brought the futures to within two ticks of the 1187.25 midpoint associated with that target. The fact that that midpoint was precisely achieved by the day's two failed rallies suggests that the 1227.75 target will be useful to us.  However, because the target is by now perhaps too well "advertised," I'd suggest using camouflage on the 15m chart or less if you plan on using this high-odds Hidden Pivot to get short.  In the meantime, because there is 50 points of implied upside if and when the futures break decisively above the midpoint, using camo tactics to get long is strongly advised. Initiating bull trades near these levels may be easiest for Sunday night-owls, since the September contract created the kind of tedious chop on Friday that tends to leave our trading competitors waiting for "something" to happen. Our specialty, of course, is using impulse legs to alert us to the very first sign that something is about to happen.  Want to learn to use the Camouflage Trading  Method yourself? Click here for information about the October 5-6 Hidden Pivot Webinar.

As The Great Recession tightens its grip on the urban slums of the U.S. and Europe, a darker side of social networking has begun to emerge.  Last week, the civilized world was appalled to read about rioting British “youths” tweeting their friends and comrades-in-arms to join the fun. “We need more MAN than Feds so Everyone run wild, all of London and others are invited! Pure terror and havoc & Free stuff…just smash shop windows and cart out da stuff.”  Ahh, “da stuff!”  Such swag as has seldom been seen in London’s dismal rookeries: bowler hats from Locke. Brigg umbrellas. Church shoes.  London’s bobbies should have no trouble picking out the perpetrators on Monday.  They’ll be wearing bespoke suits that fit as poorly as O.J.’s infamous glove. Yobs will be firing up Cohibas with (unmonogrammed) Dunhill lighters, broad-tossers’ wrists will be adorned with Patek Phillipes, and louts will be ordering up Dom Perignon by the flagon in Piccadilly taverns. All of this may sound vaguely familiar to Americans who endured the urban riots of the 1960s, decades before social networking was even imaginable.  Back then, FM radio was the medium best suited to celebrating the spoils of rioting.  And celebrate it they did: “Good morning!! boomed WUST disk jockey "Moon Man" the day after Washington D.C. erupted in flames in response to Martin Luther King’s assassination in April 1968. “How are all of you Boss Jocks out there with new color TVs and radios?!!  he asked, addressing and audience that must have included at least some listeners who had thrown bricks through store windows and crated off stolen appliances the previous day.  Riots were ostensibly “political” back then, and a news media that was only beginning to incubate White Guilt made all of those who watched the violence from their

Viewed on the hourly chart, yesterday's rally wasn't as powerful as news reports may have led many to believe. For a close-up look at a raging bull with a chicken's heart, check out today's E-Mini S&P tout.

Amazing how far the futures can rally without doing anything impressive.  Yesterday's technically feeble headline-grabber topped out three ticks from the target shown, apparently intimidated by the not-especially-daunting peak at 1189.00 noted in the chart.  DaBoyz may be able to squeeze the futures above it today, but the fact that it will have taken a second try and a running start is not exactly the stuff of which powerful recoveries are made. _______ UPDATE (9:50 a.m. EDT): Minutes after the opening, the futures have topped within a point of an 1187.25 HIdden Pivot midpoint that is associated with a 'D' target at 1227.75. (5m, A=1103.00 on 8/11 at 8:35 a.m. EDT). Since this peak has refreshed the bullish impulse by exceeding yesterday's high, my bias is bullish at the moment.

Short-term, Silver has a couple of  things going for it: 1) the recent low at 37.025 fell well shy of its Hidden Pivot target, and 2) the reversal since then has 'gone impulsive' on the hourly chart.  The relevant pattern projects to 40.180, and although a move to that number hardly looks like done deal shortly before 2 a.m. EDT, the fact that the 30.065 midpoint has already been exceeded by a nickel will weigh in bulls' favor.

A Hidden Pivot at 1778.60 can be used by night owls for trading guidance. This modest rally target is tied to a 1764.50 midpoint that was decisively exceeded on the second try. The futures are stalled at the moment near 1770, however, because three peaks have been made near there since yesterday morning.   The modest move required to reach the target would surpass two important peaks on the hourly chart, giving bulls new authority, at least for the near term.