Thursday, October 13, 2011

With Thursday's touts, I haven't gone very far out on a limb, but there's room nonetheless for a bullish play in the E-Mini S&Ps if traders remain intoxicated with the bullish "story" on Greece et al. Not that every one of them doesn't know it's going to end badly; just that each is acting as though he will be just ahead of the panic when it hits.

Precious metals prices continued their gradual recovery yesterday, but traders remain in suspense as to when the next big move will come and which way it will go.  Cautious, tentative recoveries after sharp selloffs are common in the metals, and this might be reflective of a market structure characterized by large, establishment players whose policy is to restrain the bull market as best they can.  These institutions drive the big selloffs, and they often prevent prices from recovering in "slingshot" fashion from the deep selloff lows.  The resultant gradual recoveries keep small-time bulls in a state of fear, lest a new lightning selloff commence in the middle of the night.  This might happen any night now, but the current consolidative phase might as easily end with China and other buyers getting aggressive.  Yesterday gold made a narrow new recovery high.  The "D" target at 1714.50 remains the one to watch, with a a stop loss of at least six ticks recommended to short-sellers.  Also bear in mind the midpoint pivot of the large pattern at 1756.30.  Looking the other way, a print at 1622.80 would confirm a "D" target at 1409.50.  (Posted by Doug "harry" McLagan)

Financial consultant Chuck Cohen's (click here to get in touch with him)  excels at interpreting sentiment figures.  Following is his very bullish, contrarian take on the latest data from Hulbert's: "This latest extraordinary Hulbert stock report, along with today's Investors Intelligence report (which reported increasing bearishness among its survey, in spite of a sharp rise in stocks,) reinforces the very bullish landscape for the stock market, and by proxy, the precious metals. This outlook is also reflected in the Hulbert Gold Survey, which is at nearly zero. "I realize that we are all seeing one gloomy announcement and prediction after another, but please rise out of your barricaded cellars, to understand that we are very likely to see a shocking rise in stocks and precious metals. The sentiment among professionals and the public is now approaching the 2009 lows when stocks rallied almost 66% to their highs. "This appears to be heading into markets unlike anything we have ever seen. My strong sense is while almost every pundit is warning of a deflationary depression, we are in a formative shift into hyperinflation."

Crude has rallied nearly 15 percent off early October's lows, implying that the easing of gasoline prices in recent weeks may have run its course. That will probably hold true even if crude turns weak again, since oil prices always seem to rise much more easily than they fall. Regarding the intermediate-term trend, a clear signal looks imminent, since the December futures will either correct here in b-c fashion (see inset) or get second wind for a push above the September 27 high at 85.00.  The latter scenario would create a bullish impulse leg on the daily chart -- the first such bullish sign since August 31.

The peak of yesterday's rally exceeded mid-September's 1214.50 highs by a point-and-a-half, transforming the steep rally of the last two weeks into a bullish impulse leg.  On the daily chart, this is the most bullish event since August 29, when a lesser upthrust similarly "went impulsive."  That rally fizzled a couple of days later when it entered a tiresome, month-long dirge, but it's too early to predict whether this one will fare any better.  However, because it missed breaching 1223.75, a top made on August 31 that is still the highest high achieved since the broad averages bottomed three weeks earlier, there may be a camouflage opportunity to get long in the offing.  I've sketched this out hypothetically so that you can play along if you've got the patience for it.  Want to learn how to nail swing highs and lows precisely, and to manage trade risk with a simple approach? Click here for information about the upcoming Hidden Pivot Webinar on November 16-17 and a $50 discount.

[We wrote approvingly a while back about a think-tank plan that calls for allowing millions of Americans to re-finance their homes, even if underwater, at today’s record-low rates. This gift to debtors would come at the expense of bondholders, who would see their income reduced because of lowered monthly mortgage payments. Sounds like a pretty good idea, right?  Perhaps not, since, as we later came to understand, letting homeowners off the hook would require some very tricky legal maneuvers, some of them unprecedented. Rick’s Picks forum regular John Skerencak (aka “John Jay”) thinks it’s just a bad idea, plain and simple. In the guest commentary below, he responds to the proposal as presented in a recent Wall Street Journal op-ed piece. RA ] Following is my response to a WSJ op-ed piece, “We Can’t Ignore Housing Anymore,” that suggested that a 4% refinancing scheme be enforced by government fiat to free up spending money to boost the economy: You have got to be kidding!  A government edict that would refinance everyone in order to support still-bloated housing prices?  Determining real estate values is the job of the market. The banks and Fannie/Freddie still hold millions of upside-down loans thanks to previously outlawed MBS financing and the $250k/$500k tax-free gains on housing accelerant, as well as ZIRP, and Greenspan/Bernanke cheerleading the entire debacle. Why don't you argue for RICO indictments for the Ponzi tactics of Wall Street instead of pouring more trillions down the rat hole of housing that will only serve to cover up those crimes and enslave mortgage debtors  to overpriced real estate? The U.S. economy is not going to recover because we have been sending  jobs and factories offshore for thirty years while admitting millions of immigrants who have suppressed real wages. The government should acknowledge that their