Monday, October 13, 2014

I’ve been touting the ongoing bull market in T-Bonds as one of the best investment opportunities of our lifetime – a no-brainer, as far, as I can recommend.  About the only way this bet can lose is if inflation returns with a vengeance. This has never been much of a worry for me, since, on the inspiration of C.V. Myers’ prescient 1976 book, I’ve been writing about the threat of deflation for more than 20 years.  As Myers noted, every penny of very debt must eventually be paid – if not by the borrower, then by the lender. So far, lenders have hung tough on their terms, and although a recklessly expansive monetary policy has cut mortgage debtors in particular some slack, there is no reason to think private lenders will let homeowners skip free when the second stage of the housing collapse that began in 2007 begins anew. Deflation-wise, this is where the rubber will meet the road, drawing irresistible power from the inevitable implosion of the quadrillion dollar Ponzi scheme popularly known as “derivatives.” I’ll concede that while hyperinflation seems at least possible somewhere down the road, the current state of the global economy could not make it much clearer that we are going to pass through a ruinously deflationary phase first. Even then, a hyperinflation would not be driven by wage pressures or rising prices, or even by a further increase in the money supply, but by the epiphany of the dollar’s worthlessness.  This is fundamentally true even now, as some have long recognized, but it does not seem to be on the minds of most investors. Far more urgent is their dawning realization that the central banks’ main battle, especially in Europe at the moment, is against deflation rather than inflation. Under the circumstances, T-Bonds prices

We remain long Nov 22 calls whose cost basis has been reduced to about 18 cents by rolling the short side of our spread forward each week. The price assumes you were able to roll into short Oct 18 calls on Friday for at least 12 cents more than you paid to get back the Oct 10s.  I elected to come in naked-long the Novs on Monday myself because of the way things closed on Friday (i.e., there was a short-squeeze on TLT that pointed to 122.02, and a companionable long-squeeze on index futures).  My naked strategy is riskier than I'd advised subscribers, but you should at least be aware that taking extra risks will always be an option if you have good reason to do so. Now, if this little monster ever corrects, I'll hold an 'impromptu' session to help subscribers set up a brand new play with an ambitious target. We may also opt for legging into vertical bull spreads if the correction looks precisely targetable. _____ UPDATE: The peak of Tuesday's rally came within 0.04 of the long-term target shown (a new chart, with a slightly revised target), giving us strong reason to expect a significant correction from these levels. It should be assumed that Hidden Pivots always 'work' -- implying that if TLT now blows past this one, buyers are not even breathing hard after the steep run-up of the last month. Our calendar spread, meanwhile, should produce a premium gain of perhaps 12 cents each week that we continue to roll it forward between now and November 15.  Many subscribers appear to have rolled the spread upward, which would have the effect of increasing profits from the rally. If you let me know in the chat room where you stand, I can provide more-precise guidance.

The chart shown corresponds to the one displayed alongside today's DJIA tout. I offer it for the guidance of those who want to bottom-fish. I would suggest using somewhat-out-of-the-money call options that sell for under 0.80.  Also, you should buy options that expire this Friday, since, if we're going to be right, the position should show a profit within minutes of the trade. Keep your bet small unless you are very nimble or really know what you're doing.  I say nimble because the trade could be tricky if 163.69 is hit in the fist minute or two of the session.  You should stop yourself out if the calls trade for 0.15 less than you paid for them. ______ UPDATE: Not a word about this trade in the chat room, so I'll assume nothing was done. Regardless, with DIA having fallen to as low as 162.84, you should be out of the trade,

Some very clear ABC coordinates predicted Friday's low (see inset), just as they are likely to accurately predict a further fall to 16423 when the Indoos catch up with index futures Monday morning. If the futures have already turned higher by then, leaving the Dow with no reason to follow through to the downside, the blue chip average could get short-squeezed pretty hard. If so, the rally would become an enticing short at 16761, the midpoint pivot of the large, downtrending pattern.

Someone inquired in the chat room Sunday night whether the ongoing slide in the stock market might catalyze a melt-up in bullion, especially with stocks getting hit ahead of Monday's opening.  We needn't guess about this, since we have Hidden Pivot Analysis to provide a reliable answer.  I'd suggest using the 1242.90 target shown as a minimum upside target for now. It would be most encouraging if the December contact were to rip through that number with ease. Conversely, if the futures generate a bearish impulse leg on the hourly chart without having achieved 1242.90, that would be a bearish sign. Night owls wishing to trade the move should note that even on the hourly chart, there are some external peaks subtle enough to use for a low-risk entry attempt. ______ UPDATE (October 14, 9:27 a.m. EDT):  The last three days have produced a camouflage-y impulse leg on the daily chart. The coordinates to use for getting long are: A=1217.60 (10/10); and (so far), B=1238.60. What makes this a camo opportunity is the fact that B slightly exceeded the 9/23 external peak at 1237.00, along with an internal peak at 1234.00 recorded on 10/9.

DaBoyz are doing their thieving best Sunday night to find a level where they might exhaust sellers, the better to suck up stock at prices they won't soon regret. This game has gotten old, however, and may no longer even work, as we have seen in recent weeks. It is dangerous as well, since the only short squeeze they've been able to engineer worthy of the name required yet one more dithering, meaningless pronouncement from the Fed.  When will the Open Market Committee meet next?  It can't come too soon, since the investment world is desperately in need of word that no significant changes in monetary policy are coming. From a technical standpoint, the futures slightly exceeded our 1896.75 correction target on Friday.  The fact that pivot-smashing piece of the selloff came during the 15-minute run-off after-hours was our first hint that stocks would not open with a song in their obsidian heart this evening.  They've trade well below the invisible support since, suggesting that still more weakness is forthcoming. The low so far this evening has been 1880.50, but bulls and bear alike should use the 1874.75 target shown to trade the opportunity thereof. ______ UPDATE (3:59 p.m.): Interesting that DaBoyz were able to keep this hoax afloat for five hours today before mother nature took her course, sending shares plummeting once again.  It's smelling more like a Bear Market each day.