Tuesday, December 13, 2011

My technically bullish outlook for the dollar is none the worse for late November's swoon. That swoon, incidentally, bottomed to-the-tick at the p midpoint resistance-cum-support of the pattern shown. Its 'D sibling lies at 81.11, which if achieved would challenge key highs made a year ago.  I will have more to say about this in a commentary later this week, but for now you should be aware that a move above 80 could trigger a massive unwind of the dollar carry-trade.

A Hidden Pivot support at 30.520 remains my minimum downside target for the near term. As suggested here earlier, you can bottom-fish there either via camouflage or with the tightest stop-loss you can abide.  Keep in mind that the 28.425 target of a larger pattern identified here a while back is still very much in play.

Gold was getting smacked late Monday night, slightly lengthening the impulse leg that had formed earlier in the day on the hourly chart. A downside target at 1633.10 that I've billboarded and drum-rolled here looms as a very important number, since a decisive penetration would put its 'D' sibling at 1459.40 in play.  How decisive?  I'd say a 3.00-point overshoot, or a two-day close beneath it, would make the lower number no worse than an even-odds bet over the next several weeks.  The provenance of both numbers is shown in the accompanying chart.  Please note that a secondary pattern, shown in purple, has a 1638.10 target that could turn the tide for bulls.  It will most surely be worth bottom-fishing, preferably using camouflage with theoretical risk capped at 0.60.

We hold two Jan 54 puts and two Jan 53 puts whose cost basis has been profit-adjusted downward to, respectively, 0.76 and 0.57. I've suggested shorting December 54 and 53 monthly puts against them for the same price, yielding risk-free calendar spreads, and that's what we will do officially. We may try something else if the selloff begun yesterday stalls, though, since it will take a pretty nasty downdraft to get our short offer filled. However, you might also consider emulating a chat-roomer who reported legging into $2 vertical bear spreads by shorting January 52 puts against the January 54 puts he already held. Because he did so for a net credit, the position will make money regardless of whether the QQQs rise or fall. However, it will also give him a risk-free bear play into the New Year, with a $200 profit assured if the Cubes fall below 52 by January expiration.  For now, my minimum downside target is the 54.87 midpoint of the pattern shown.  You can leverage this number as you see fit, but my hunch is that it will foster a tradable bounce from within no more than four ticks of 54.87. Click here if you’d like to learn more about the Hidden Pivot Method, including how to identify and trade targets such as the ones used above, and to forecast trends with bold confidence.

The futures were wafting toward a presumptive Hidden Pivot rally target at 1241.50 Monday night, but a bigger picture implied a bull trap in gestation.  That's because Monday's downdraft was impulsive on the hourly chart (see inset), but the E-Minis would nonetheless become a speculative buy at either the 'p' or 'D' hidden supports shown.  The same pattern could prove to be shortable as well, but you'd need to initiate the trade on a lesser chart with a downtrending abc pattern that would subject you to theoretical risk of no more than five ticks.

[The commentary below elicited quite a response, so I'm letting it run for a second day. Wednesday's commentary will feature two very important trading tips for permabears who have been trying for years without success to short the elusive Mother of All Tops. If you're interested in learning the "parlor trick" that we used on Friday to get short the QQQs ourselves within a hair of the intraday high, click here. And if you'd like to have these daily commentaries delivered to your e-mail box free of charge, as will as free access for a week to all of Rick's Picks services and feratures,  click here. RA] Who’d have believed that the word “hypothecation” would grab the financial world’s shakers and movers by the balls last week, whirl them round-and-round, then dash their cynical pretenses of “saving” Europe against a stone wall?  Click here to read the article on this topic at ZeroHedge if you haven’t done so already. And then send it to everyone you know. We did, with a warning that the collapse of the banking system is no longer merely possible or likely, but unavoidable. The article takes pains to explain why in terms that even the layman can understand. It will undoubtedly have created quite a stir not only among the broad readership of web sites that linked it, but among those charged with the task of further delaying Europe’s financial collapse. The spinmeisters and policymakers have been doing their utmost to obscure the details of the supposed rescue effort, since the better those efforts are understood, the more absurd they become. And yet, as our colleague Bill Buckler, editor of The Privateer, points out, the clamor to “solve” Europe’s debt problems with trillions of ginned-up printing-press euros or dollars is nearly universal.  One might think