Thursday, December 5, 2013

Yesterday's strong rally in gold was encouraging, but the burden of proof still lies with the bulls. For specific benchmarks to gauge their enthusiasm -- and their buying power -- check out today's tout for February Gold and the chart that accompanies it.

We hold eight December 400-410 call spreads with an effective cost basis of 0.40. Continue to offer half of them for 1.10, good-till-canceled.  With just two weeks to go before our way out-of-the-money spreads expire, the stock's stall this week has been frustrating. This was especially true yesterday, when NFLX ended the session with a $6 loss even though most of the other high-fliers recovered earlier losses in the final hour. Is there perhaps negative news in the offing? We'll find out soon enough. (See the attached chart for another possible explanation.) In the meantime, take encouragement from the fact that the Santa rally -- I really do hate that term --  is due to kick off next week if seasonal influences that have worked in the past continue to obtain. _______ UPDATE (December 9, 12:30 a.m.): It will be do or die for our spread today and tomorrow, since, after that the stock will need to rise $4 a day just to offset time decay. For now, lower the offer on half the spreads to 0.90. The weight of what you're feeling can be attributed to the fact that everyone seems to have made the same bet that we did: NFLX as a high-beta market leader in December.

When was the last time we saw gold take a second leg up rather than simply give up whatever gains it may have achieved overnight?  It doesn't happen too often, and that's why beleaguered bulls may have felt something akin to exhilaration as yesterday's $40 surge unfolded. Many of them are undoubtedly wondering whether the rally will turn out to have ended the bear market in bullion that began 27 months ago. It's possible, of course. But technically speaking, the evidence still suggests that a Hidden Pivot target at 1125 first disseminated here a while back will eventually be achieved. Even so, the bull deserves the benefit of the doubt for now, since both of Wednesday's discrete thrusts did what a healthy bull is supposed to do -- i.e., surpass at least two prior peaks on the hourly chart.  However, the December contract will have to repeat this feat, and soon, if we are to infer that significantly higher prices lie in store. Specifically, the futures will need to pop above the 1268.00 'external' peak labeled in the chart (see inset). Were that to occur today, there would be little doubt that a significant rally -- i.e., one with the power to continue for perhaps at least 7 to 10 days -- is under way. Incidentally, Comex Gold has been moving very precisely in relation to our proprietary Hidden Pivot targets.  Yesterday's low at 1212.90, for one, lay just a single tick from the 1212.80 target first broached here several weeks ago when the December futures were trading around $1300. Although we had expected a tradable bounce from very near 1212.80 and had told subscribers to try bottom-fishing there, the $40 trampoline bounce in mere hours came as a pleasant surprise.  _______ UPDATE (5:45 p.m.): So much for the crazy