It’s a sad time for America when a firm that does what Facebook does is on track to become one of our largest companies. Based on capitalization, the web-based lubricator of social interaction could be in the top 50 within a few years, or even in the top 25 if analysts’ wildest expectations pan out. Facebook’s IPO promises to top Google’s $27 billion offering, reaping early backers a giant windfall. But wouldn’t it be far better if a company that actually made something were to enjoy such extravagant enthusiasm on Wall Street? Facebook of course makes nothing, and what it sells is of little economic value to anyone. And yet its founder, Mark Zuckerberg, is about to become one of the wealthiest men in the world. » Read the full article
Price action early Tuesday morning was so tired that it looked almost incapable of generating any heat unless sparked by some sensational piece of news overnight. Unfortunately for traders, as of around 2:40 a.m. EST, the child-molesting teachers at an L.A. school were holding the top spot above-the-fold.
Gold’s downtrend stalled yesterday between two minor, bearish Hidden Pivots, but not before the June contract had taken out three more external lows. This is discouraging action for the near term, and it suggests the 1702.00 target given here earlier remains a good place to look for a tradable low. Alternatively, we can set the bar at 1747.50 (see inset) today to signal a meaningful resurgence of bulls. ______ UPDATE (2:33 p.m. EST): The April contract has rallied nearly $40 from this morning’s fake-out low, creating a bullish impulse leg on the hourly chart. Now, assuming 1752.60 holds as ‘B’ of the current impulse leg, Gold will need to pull back by at least $12.50 (0.625 of $20 k-A segment) to be considered fully re-charged for a C-D follow-through leg of as much as $40.
As has occurred with increasing frequency in recent months, the markets have opened Sunday evening with a timidity that belies their underlying, rabid demeanor. All DaBoyz need to trigger the short squeeze that would officially kick off this season’s ‘Santa rally’ — I hate that phrase — is some mote of news that could be construed as remotely bullish for stocks. (Said news evidently won’t be coming from Wal-Mart or other retailers that target the down-and-out, however.) My guess is that the futures will reach the 1814.00 target (see inset) overnight. That wouldn’t leave much for night owls to trade, but the target can be shorted nonetheless using camouflage. Please note that even a small overshoot of perhaps 1.00 point or more would be warning bears to get out of the way ahead of the opening bell.
At the Mining & Minerals Conference that I attended last week in San Francisco, I found Altius still to be high on the list of many savvy investors. With $130 million cash in reserve and a royalty stream that nicely offsets fixed outlays of $5 million per year, the company is well positioned to ride out whatever further pain bullion’s bear market inflicts on investors. Altius is waist-deep in iron ore investments these days, causing some to remark that bullion is no longer much of a concern to the company. This is an exaggeration, but investors should be happy in any case that the firm is doing what it takes to survive gold’s fall from $1900 to a recent $1220.
From a technical standpoint, the stock has been in a holding pattern centered on a $9-$11 range for more than three years. The weekly chart shows ‘dueling impulse legs’, implying that the tedious battle between bulls and bears could continue for yet some time, perhaps with an exhaustion skew down to $8 or a little lower. At that price, especially considering Altius’ enviable cash position, the stock would represent a back-up-the-truck buying opportunity.
We hold twelve December 145 puts, offset in ’straddle’ fashion by bullish NFLX call spreads we own. To simplify accounting, and to consolidate the risk, I’ve imputed the cost of the puts to the NFLX position so that we now hold eight December 400-410 calls spreads with an effective cost basis of 0.55. Keep in mind, however, that the DIA puts still have value. As such, I’ll recommend that you offer them to close, good-till-canceled, for 0.02 less than the market makers. To do this, wait until the options have opened each day to see what bid/asked is being reflected by DaRapacious Dirtballs. At the moment, they are showing a bid of 0.06 and and offer of 0.12 (!). This means you should be offering the puts for 0.10. Please notify me in the chat room if your order fills, since it would be nice to have the puts off the sheets even though we are carrying them for zero. _____ UPDATE: Some closing sales @ 0.10 were reported, and so I’ve used the proceeds as an offset against the cost of our NFLX spreads.
In the current forum discussion, Cam Fitzgerald focuses on coffee’s bear market to provide some lucid insights into the deflationary dynamic at work in the commodity markets. He notes that although the price of coffee beans has collapsed, falling by two-thirds since 2011, Starbucks is still charging the same four bucks for a large latte. This profit-friendly anomaly has held true for many other companies that benefit from a widening spread between commodity prices and end products. It would seem to flout the laws of supply and demand, but Cam says the textbook relationship will reassert itself with a vengeance as consumers become increasingly frugal under the weight of a deepening Great Recession.
From a technical standpoint, his theory looks quite solid. The weekly chart (see inset) implies that a pound of coffee currently trading on NYMEX for $1.03 is about to fall by half. If the futures were in fact to achieve the Hidden Pivot target of 53 cents, that would represent an 83% drop from 2011’s all-time high of $3.08. Coffee lovers may have something to look forward to, but they should be careful what they wish for, since the implication of coffee beans selling for 50 cents a pound is that the world by then will be chest-deep in a deflation of falling wages, plummeting asset values and significantly lower corporate profits.
A query in the chat room Friday concerning the Dow Transports sent me to the charts in search of the inevitable rally-stopping Hidden Pivot. The index has been on a tear this year, up 35% since January. Much of the gain can probably be attributed to a new airline business model that has been great for carriers but horrible for passengers. We’re talking about things like Spirit’s $35 charge for storing carry-ons in the overhead bin. Lower fuel costs have also helped, especially since the carriers have evidently chosen not to share any of this windfall with passengers via lower ticket prices. And no passenger who has sat in the increasingly cramped economy section can be unaware that capacity has shrunk so drastically that nearly all flight are full or nearly so.
Perhaps it will be the full-force resumption of The Great Recession that stops the rally cold. In any case, the 7444 target shown, representing a 6 percent premium over Friday’s closing price, looks formidable enough to provide more than a little challenge for bulls. Those who trade this vehicle or related issues can use it as a minimum upside objective for now, but you’ll want to reverse the position and go short — tightly stopped, of course — if and when it is reached. _______ UPDATE (November 5, 8:45 p.m. EST): If it’s going to be an easy cruise to the 7444 rally target noted above, we should see the correction from Monday’s high reverse today from near the 7077 midpoint support (see inset), but certainly from no lower than the d correction target at 7042. More downside than that could be our first, subtle warning that all is not well with the Transports, which have flourished even as airline profits have soared on a suicidal model that would nickel-and-dime passengers to death. _______ UPDATE (November 19): You go, girl! Wall Street’s best and brightest fly first class, presumably desensitizing them to the fact that the fabulous recovery in airline profits that has helped push the Transports into a vertical climb is being driven by the steep deterioration in amenities once enjoyed by passengers, even those who flew economy.
My outlook has been bearish, with a 45.29 downside target, notwithstanding a couple of short-covering eruptions along the way. I am now lowering the target to 43.83, however, on the basis of the chart shown. Your trading bias should be bearish until the target is reached, or very nearly reached, but if and when that occurs, you should reverse the position and get long with a stop-loss as tight as 0.20 cents. I’d suggest a good-till-canceled bid of 43.88, since it’s possible the stock will turn without quite having reached our number. If the order fills and survives the stop, tune to the chat room or this page for further guidance. _______ UPDATE (November 13, 8:33 p.m. EST): The stock has lost my interest and attention, so I’m taking it off the front page for a while. One final note, however, that could prove useful to camouflage traders: At Wednesday’s closing bell, it reversed the bearish polarity of the last three weeks with the bullish impulse leg shown (see inset, a fresh chart). ________ UPDATE (November 26): After taking its sweet old time reaching my 43.83 target, Facebook has taken a lunatic bounce this morning from within 23 cents of it, hitting a so far high of 46.08. If you loaded up near the low, please let me know in the chat room and I’ll provide tracking guidance. Whatever you may have bought, half should have been exited by now for a partial gain.