Friday, March 9, 2012

The Junior Gold Miners ETF known as GDXJ has been trending lower for fifteen months, but a recent midpoint reversal might be part of a larger turn toward bullishness.  The reversal came just above the 25.105 midpoint of a weekly pattern whose impulse wave was very strong, taking out two far external prior lows and coming close to making an all-time low for the vehicle.  We should watch to see which comes first, a breach of the midpoint or of the pattern's "C" point at 30.55.  A move above "C" would be the best signal yet that the long downtrend has ended.  If the midpoint is decisively breached by a print below $25, the pattern's "D" target of 19.66 might be next, although that would be a long way down in percentage terms.  If GDXJ gets there, traders should use a stop at 19.49 and investors should back up the truck.  (Posted by Doug "harry" McLagan)

The gold price continues to move gradually higher toward short-term targets ranging up to 1733.60.  The best-looking patterns give us "D" targets at 1720.90 and 1728.30, and a larger and less obvious pattern gives us a midpoint pivot at 1733.60 which we should not overlook.  More than a third of the recent $129 decline has been retraced by the gradual uptrend since Tuesday's 1663.40 low, and an imminent high could become the "C" point to go with the recent impulse down.  The 1733.60 midpoint is based on A=1652.20 on January 25.  This pattern's large 92% pullback might be an omen of price weakness to come, perhaps at the midpoint pivot.  Traders should not have orders entered at 8:30am when the Non-Farm Payrolls report comes out but should be ready to respond to the news.  (Posted by Doug "harry" McLagan)

DaBoyz were holding their cards close to their chest early Friday morning after failing to short-squeeze stocks above the previous day's highs. A sharp pullback in progress shortly after 1 a.m. EST hinted of another try, albeit with futures contracts to unload that have been filched at fire-sale prices.

We hold two June 40-42 call spreads effectively for free after shorting two June 42 calls yesterday for 1.17 against June 40s bought earlier whose cost basis had been reduced by profit-taking to 1.17.  What this implies is that we cannot lose even a dime on this trade no matter what the stock does, but we stand to make as much $400 if Silver Wheaton is trading above 40 come June expiration.  For now, do nothing further. If SLW moves sharply higher over the next month or so, we would likely have an opportunity to trade out of the position for a nice gain before the options expire. As of yesterday's close, the stock had exhausted its upside potential for the day with a thrust to 36.39 that exceeded the Hidden Pivot target shown by three cents.  

Bulls regained command yesterday after impaling no fewer than four 'external' peaks on the hourly chart and closing this vehicle near the intraday high. There's little point in focusing on Hidden Pivot targets just above, since any I might offer are overshadowed by the resistance of two important peaks at 1377 recorded respectively on February 29 and March 1.  Once above them, the futures would become an odds-on bet to hit 1381.25, the target of the pattern shown. That number is shortable via camouflage; or, more simply but with more risk, using a 1381.00 offer, stop 1382.25. If you use the latter strategy, exit half the by-then-profitable position at 1377.25 and use a trailing stop suited to your style for the rest.

[What themes will drive investment in the next decade? In the essay below, ‘Mercurious,’ a frequent contributor to the Rick’s Picks forum, sees the ebullient U.S. consumer as a dying breed. Even so, for investors who understand that consumption itself is not going to die but merely change, there is money to be made. RA] As investors, we should be keen to discern changes in large-scale behaviors that will affect the what and when of our buys. The market ideally is a barometer of where we are in an increasingly interconnected world, and even factors like high frequency trading are usually just amplifiers of what is, rather than total distortions of it. When we survey the effects of ongoing world-wide financial and political distress, can we begin to see changes in the contours of how we think and what we buy? If we do, it would be prudent to take them into consideration and invest accordingly. To begin, this is fundamentally a U.S.-centric analysis. While other areas of the world are rising fast in overall consumption spending and investing, the U.S. still leads that metric, and for the time being remains the dominant arbiter of popular culture. I think the feedback mechanism of instant communications is supporting the emergence of a world-wide cultural norm, so this is not just about the U.S. in the long run, but I'll confine myself to the U.S. for now. Some themes we would want to be aware of in orienting ourselves to the current domestic landscape would be: a flood of technological innovation, much of it focused on and available to the masses; a retreat/collapse in widespread employment of a level consistent with a middle-class lifestyle as we've come to know it; tremendous political ferment on both the left and the right; unprecedented levels