December 2012

You can see in the hourly chart (inset) just how far DIA is likely to fall if the dam gives way.  Friday's finishing stroke was bearishly impulsive to begin with, and so the 127.05 target of the pattern shown hardly seems out of line.  The p midpoint at 129.02 has already been breached, but not by enough to make the plunge a done deal. _______ UPDATE (January 3 at 2:06 a.m. EST): A powerful reversal from well above 127.05 has put this vehicle on track to hit 134.89.  This outcome would appear all but certain, judging from the way DIA gapped up through the 131.72 midpoint resistance of the pattern shown. The target can be used to get long now, or short soon, but camouflage will be tricky to find on the last leg up, given the runaway power of this move. _______ UPDATE (January 15 at 11:26 p.m. EST):  Twelve days later, DIA did indeed hit 134.89.  It actually topped 11 cents higher than that before DaSleazeballs pulled out the rug the next day with a gap-down print at 134.24 on the opening.  This brazen shakeout was followed by a rip-roaring rally that began on the next bar.  Now, I expect buyers to push this hot little mama to the 137.71 target of the pattern shown.  Camouflageurs will need a deft touch to go with the flow.

I'm keen on putting out a short in the Diamonds, since my hunch is that 2013 is going to start with the nasty dive the stock market's been postponing since the bad news on November 6 . It is the nature of the game, however, that getting short today will require sweating out a possible fiscal-cliff deal that could send stocks into a bullish spasm.  While it would likely be fleeting, that would be of scant consolation to anyone caught in the short-squeeze. On balance, I'll suggest staying tuned to the chat room and to E-Mail Notifications for timely advice, since I may decide to play it down-to-the-wire.

We hold four Jan 590-600-610 butterflies @ 0.20.  Although total risk is only $80 plus commissions, the dirge that has gripped this stock for the last two weeks has made our bet a longshot.  As you know, I'd been looking for a strong year-end surge, mainly because bonus-hungry portfolio managers stood to make a pile of money if AAPL had finished Q4 on a strong upswing. Their inability to make this happen is probably the single most compelling factor behind my very bearish outlook for January and beyond. If DaBoyz cannot in fact goose this stock -- can't even arrest its fall, actually -- then they will be seriously on the ropes as 2013 begins.  Accordingly, a target at 464.99 should be held in mind as a minimum downside objective for now (60m, A=635.38 on 10/22). In any case, I'll suggest offering the 'fly to close for 0.25, a tad more than we paid for it. This order can stand as long as the stock is trading for $525 or less. The spread can certainly be sold for that much with a little work, but you'll have to decide for yourself whether it's worth it.  You might also choose to hold the spread until stocks have had a chance to react to a fiscal-cliff agreement, assuming one comes. ______ UPDATE: Apple's leap Monday above $530 has taken our spread off the table. For now, sit tight. Click here for information about the upcoming Hidden Pivot Webinar and a $50 discount.

A downside target at 1378.50 (see inset) will likely put a floor beneath any gyrations that attend inconclusive news from Capitol Hill. The 'p' midpoint associated with that number lies at 1403.50, and so a rally to that number would provide a logical opportunity to get short via camouflage. Notice as well that if the 1378.50 pivot is breached, an alternative target at 1373.75 would be in play. _______ UPDATE (10:35 a.m. EST): The futures have rallied to within two ticks of the 1413.50, but without yet producing an abc downtrend that could be shorted using camouflage.  If you initiated the short anyway with a 3-tick stop from 1403.50, continue to use 1404.25 as a stop-loss.  This morning's strength is absolutely inscrutable, at least to me, since there does not appear to be much movement toward a fiscal cliff deal with the clock about to run out.

Index futures remained hard-wired to vibrations from Capitol Hill Sunday night, nervously discounting each mood shift perhaps 30 to 40 minutes ahead of whatever web-based reports were to follow.  Shortly after 7 p.m. EST, the E-Mini S&Ps were up the equivalent of about 50 Dow points, suggesting DaBoyz were willing to go way out on a limb based on the flimsiest reasons for optimism.  For index-futures traders who make their living at night in the thinnest of markets, this amounted to a game of chicken, since any hint of a new impasse threatened to reverse the current rally, turning it instantaneously into a 100-point decline. At last glance, news reports had Republicans giving ground on a measure that would have changed the way inflation is calculated to determine Social Security and other benefit payments. It's hard to believe a formula exists that would lower the marquee inflation rate beneath where it already is. Be that as it may, as we went to press there were evidently gaping differences on some other key issues, including the Alternative Minimum Tax (AMT). [Late-breaking news: Talks adjourned Sunday night with no agreement in place.] Think You’re Safe? Whatever fiscal package emerges, it would appear that Joe Taxpayer confidently believes it's going to be someone else’s ox that gets gored. A headline in the local paper revealed the public's not-exactly-shocking ignorance about what’s going on in Washington: Shoppers Not Fearing Plunge Off 'Cliff' was how the Boulder Daily Camera presented the story-of-the-hour.  Oh really?  It's a tragedy for America that people like those quoted in the article are allowed to vote, since they in fact have much to fear, even if they are not among Obama's “filthy-rich” earners of $200,000 or more.  For starters, a steep upward skew in the Alternative Minimum Tax that is

Today's chart is intended to throw cold water on any spark of enthusiasm you may be harboring for gold right now.  As you can see, there's plenty of room for the futures to fall if they're going to test the lower trendline.  My guess is that this will occur, although I doubt the selling would go much further than that.  The additional good news is that a subsequent bounce within the pennant would require less energy for an upside breakout because the boundary lines will have narrowed.  Most immediately, however, the lesser charts are bullishly impulsive and project to 1674.10 if p=1667.70 can be exceeded on a closing basis. (The relevant pattern can be found on the 15m chart, where A=1653.10 at 9:45 a.m. EST on 12/27, and B=1666.10.)

I disseminated a 1378.50 downside target yesterday when the futures crushed the 1403.50 midpoint support of the pattern shown. It's yours to leverage as you please (see inset), but we shouldn't get too immersed in such relative trifles, since fiscal-cliff mania could be rampant at any moment of the day.  Such hysterics would of course be constrained, if not to say governed by, Hidden Pivot swing points, but merely knowing where those price points are does not necessarily guarantee us a safe-boarding pass and a comfortable berth.  Click here for information about the upcoming Hidden Pivot Webinar and a $50 discount.

Stocks stayed glued to fiscal-cliff headlines on Thursday, transfixed by the mounting horror of Capitol Hill's potentially catastrophic impasse. Midway through Wall Street's day, with Harry Reid wallowing in a well-publicized Marianas Trench of despair, the Dow was down only 120 points, raising the question of whether The Street's best and brightest comprehend the magnitude of the tax wallop slated for auto-enactment on January 1. We're probably already in recession, after all, and huge new taxes on top of a slew of economically asphyxiating Obamacare 'revenue-enhancers' would probably suffice to turn an incipient recession into a full-blown depression. The suspicion grows that Obama has been intent all along on wrecking the economy so that he could implement his own version of FDR's New Deal. If so, he's well on the way toward realizing that goal. Meanwhile, our esteemed representatives on Capitol Hill have scheduled a special session for December 30 to discuss...whatever.  Stocks rallied back to unchanged on the news, proving that DaBoyz are eager and willing to put Other People's Money on the line if there's sufficient "good" news to sustain the epic delusion that everything's going to work out just fine.

[Inflationary pressures are not exactly rampant right now, notwithstanding the huge increase in the cost of living imposed on us by Obamacare. For your interest, we present below some observations with a deflationist theme that were left in the Rick’s Picks forum yesterday by Cam Fitzgerald, an occasional guest commentator here. In our opinion, he gets the big picture  just about right. RA] There’s no doubt that deflationary pressures are still the overriding concern of most Western nations. That deflation itself is at our gate is hardly even debated anymore, as it is now widely acknowledged that the coming wave of baby boomer retirements will lower consumption , hold home values flat in real terms and push up Medicare costs for at least the next decade. Ongoing deleveraging and the prospect of rising savings rates and falling consumption could prove to be very damaging to economic performance while lowering growth and pushing us into recession. Jobs growth is still tepid, and it is difficult to imagine this improving substantially as public debt is finally dealt with at the policy level while taxes rise and program spending is cut. Others have asserted here that we will deflate first and have nasty inflation later. I agree. The worry is just how bad the inflation might be at the later stages, but my guess is that it will take years to play out.  We who watch the trends will have time to adjust if we pay attention to the signs and use our heads to avoid the shoals that lie ahead. We have been fortunate, though. The worst of our worries have not yet materialized. That is not to suggest that they are not lying latent, awaiting the right circumstances to spring on us in surprise. Instability abounds, and any broad shake-up on