Monday, December 23, 2013

I've dissed the ultrashort ETFs as a scam designed to separate put and call buyers from their hard-earned cash. Still, if there's a way to beat this rigged game, perhaps we can find it -- especially since my gold forecast calls for a continuation of the bear market.  Our first task will be to determine how well option premiums anticipate this vehicle's ups and downs. Meanwhile, if you've had any experience trading GLL, please let me know in the chat room about your experience.

Last week's low was 1186.00, but if and when the futures resume the downtrend in earnest, slipping through the 1182.90 target (green line), the next stop on the way down to a major target at 1028.50 is 1150.80.  The last number can be bottom-fished, just as a rally to the 1209.20 midpoint pivot can be shorted (via camouflage).

Subscribers who used the 1818.00 target I'd proffered in the chat room Friday to get short could have covered the position less than an hour later for as little as 1812.50. (One subscriber who played it strictly-by-the-numbers reported shorting 34 contracts at 1816.25 and covering them all at 1814.50. The gain would have worked out to about $2975.)  Near the end of the session, I further advised keeping 25% of the original position to swing for the fences. But that, too, should have been covered, since the futures traded up to 1820.00 on Sunday night's opening bar. And now what? Since the 1818.00 target, a Hidden Pivot, is tied to a more important one at 1841.00, that's where we should assume the March contract is headed today.  I would rate a rally to that number a very good bet, but because the futures are in record territory and virtually everyone is bullish, the path they are likely to trace out on their way to the target is apt to be tortuous and devious. Night owls can try to catch a ride on a pullback to the 1818.00 red line nevertheless. As always, 'camouflage' will be the entry method of choice. However, if you're game to try another tactic, the implied 21 points of profit (on a ride from from 1818.00 to 1841.00) gives you 7 points of stop-loss to work with if you use a buy-stop entry or a straight bid at 1818.00. If you're successful on the long side of this play, you should reverse the position at 1840.50 and go short with an 1842.25 stop-loss.  If you hold no position if and when 1841.00 is closely approached, try shorting a single contract at 1840.50, stop 1841.50.

[This discussion topic has just started to get rolling, so I'm going to let it run for another week.  If you're looking for timely trading suggestions and fresh analysis in the holiday-shortened week ahead, tune to the Touts section and the Rick's Picks chat room.  A free two-week pass can be yours by clicking here.  RA] Most of us understand that the audacious fraud that has sustained the U.S. economy and the global financial system can only end badly. But how?  As far as I'm concerned, there are only two possibilities: deflation; or less likely, hyperinflation.  In any event, it’s time for another go-round in the continuing debate.  This issue seems to pop up in nearly every forum discussion no matter what the topic, so let’s use the holiday lull to focus on something that is almost certain to be more interesting than the markets. To get things rolling, here are some bullet points of my own: Because of its quadrillion dollar size, the financial bubble cannot be inflated or deflated away via a gradual process; only a catastrophic implosion or explosion is possible. The most deflationary event we can conceive of – i.e., the banks failing to open one weekday morning – is also the most likely. The monetarists’ definition of inflation/deflation as an increase/decrease in the money supply is worthless in an economy that runs on credit. To understand deflation better than most economists seem to, you need only consider its most pernicious and destructive symptom:  an increase in the real burden of debt. This is the force that is suffocating Europe but which is being held at bay – barely – in the USA by the artificial and unsustainable suppression  of mortgage rates. Federal taxes are steeply on the rise, putting yet more deflationary pressure on households.