March 2006

The real estate boom that is just beginning to deflate in many regions of the U.S. seems to be picking up steam in, of all places, Alaska. We just heard from a friend of ours who in 1989 bought a stake in a property three hours south of Anchorage. The land lies in Soldotna, a town in the oil patch that's popular with fisherman from the lower 48 as well as with oilfield workers on R&R. Although there was almost no appreciation in the first few years, the value of his property has recently gone through the roof, rising 39.57% in the last year and an average 27% over the last three years. Check out the numbers below, from the tax assessor. Can the day of the million dollar igloo be far off? (Click on image to enlarge)

A pen-pal of mine has seized on a source of frustration that continues to vex many of us. To wit, gold and bullion shares sell off savagely in a bull market while the broad stock market rarely fall for more than an hour or two in the midst of a secular bear. 'I don't think there's any doubt that the market is ready to [collapse],' he writes. 'The violence of the sell-off in gold shares indicates that the landscape has changed. Take a look at the chart of Gold Fields Ltd. for the past 5 days. When have you ever seen a stock gap down five days in a row without filling any of the gaps? [Actually, we can't recall any such instance. Here's the chart, which shows just how hard GFI shares have been brutalized in the last week]: (Click on chart to enlarge) 'That is typical of the entire gold bull. There is much more concern about getting out than getting in, while the stock market can't sell off more than 30 points without a multi-hour attempt to move up. It is quite astounding. Also, 'tis the season for good sell-offs. I did buy some puts this morning. It's a low risk try, in my opinion.' The season for "good" sell-offs, indeed. We awaken each morning wondering if we will be able to resist the temptation to plow every cent we can beg, borrow or steal into cheap put options. Fortunately, it's much harder to borrow a dime for this purpose than a dollar to buy a big Chevy. Anyone out there want to trade some put options for a low-mileage Yukon? *** Un-Cool Origami The cat's out of the bag: Microsoft's top-secret Origami is actually an 'ultra-portable' computer. Bill Gates evidently thinks millions of us will want

We billboarded a 49.08 target in Newmont yesterday because a fall to that number, precisely, looked like a lead-pipe cinch. Our strategy was therefore simple: Put up a 49.08 bid on the opening, then simply wait for NEM to come to Papa. And so it did, sort of. After a curmudgeonly feint higher in the early going, the stock reversed course and plummeted four percent to 49.20. Those of you with bids in at 49.08 will be the first to attest that 49.20 is not quite 49.08. Ditto for subscribers who, instead of bidding for stock, substituted a 2.00 bid for some April 50 calls. Neither bid got hit, and the stock ran away from us after making a double bottom at 49.20 in the space of about 15 minutes. Better to have come up empty-handed, perhaps, than to have sat on our thumbs the whole morning. Of course, we'll be doubly determined, and just a tad more flexible, the next time NEM wiggles its butt in our face. (Click on chart to enlarge) The good news is that we are starting to get the hang of put options. a shell game whose rules mutate just often enough to thwart the less diligent. Clearly, the trick is to handle puts as though they were radioactive, holding inventory up to the point when it threatens to stink up the room. In IBM, for instance, we bought some cheapie puts a few days ago, April 75s for 0.35, that we'd hoped to turn into instant doublers. But when they remained leaden the other day as the stock was falling, we decided to hit a 0.45 bid and exit with a small profit. Yesterday we held some Merrill Lynch March 75 puts acquired for a pittance ' just 0.15. How hard should it

Newmont has been good to us in the past, so we've been on the lookout recently for a good spot to re-enter the stock. You may recall that we exited a small position in January near $60, reaping a trading gain of $3,620. Alas, with the stock down by nearly $10 a share since them, it is evidently still not a buy, not quite. As much was evident yesterday when we tried to catch the falling piano at 50.37, an enticing hidden pivot support. The recommendation was disseminated via the Rick's Picks 'bulletin launcher' intraday, prompted by a query from a subscriber who was just as eager as we are to buy the stock. Fortunately, we did so with a 4-cent stop-loss, removing ourselves from harm's way when NEM failed to bounce from the pivot. In fact, the stock exceeded the 50.33 stop-loss by a whopping 13 cents, strongly implying that it will now fall to the next, at least ' 49.08 ' before it has a chance of finding traction. Today's 'Touts' provides a detailed strategy for bottom-fishing, since 49.08 looks like a more felicitous spot to initiate a long position than the pivot we used yesterday. Even so, judging from the way NEM squashed the lesser support at 50.37, we should be as careful as always in trying to pick a bottom. Incidentally, my worst-case low for the near-term is 48.63, give or take the usual farthing or two. Caution is also warranted as we try to pinpoint tradable tops in some stocks that look, well, toppy. In the case of one of them, IBM, we bailed out of a small put position yesterday for a modest profit. This was not because the stock looks unlikely to reward us, but because the mere waiting was growing quite tedious. However, we

Until the final hour or so on Friday the stock market seemed to be holding its own against an onslaught of negative news. Topping the list was a sales warning from Intel. The stock opened sharply lower on the news, but rallied back to fill the gap by day's end. The broad averages followed suit but ultimately closed well off their highs because of the final-hour selloff. On balance, however, and despite the fact that the major averages settled below the previous day's close, it looked like the bulls carried the day. Sometime around mid-session, when stocks were trading near their highs, a broker for Alaron was on CNBC, breathlessly trumpeting a stock market that for months has been climbing a supposed wall of worry. Some would say that stocks have done no such thing ' that shares are in a warp, absolutely oblivious to reality but responsive nonetheless to an unabated flow of investor dollars. What Are You Doing? And the proof? You need look no farther than your own portfolio. Have you switched your retirement fund to fixed-incomes? Given your broker targets and stop-losses to get you out of stocks? Tuned out the bullish drone of CNBC and the retail analysts? Exactly. While quite a few of us are alarmed at the economy's deterioration, especially in the all-important housing sector, none of us is even contemplating bailing out. It's go-along until 'something' changes the picture. Well, don't be surprised if the picture changes dramatically while we're asleep, leaving no easy path for escape when U.S. markets open for business. As for the supposed Wall of Worry, that's just a lot of twaddle. In fact, the news is always bad at best and skin-crawling scary at worst. If the Dow Industrials were in a bear cycle now rather than

Is the long bond about to break down? John B., a subscriber who has taken an active interest in hidden pivots, studied a weekly bond chart like the one below and that's what he concluded. Take a look for yourself and see if you agree: (Click on chart to enlarge) 'T-Bonds appear to be on the verge of breaking down,' he writes. 'I may be all wet, but I was looking at the weekly March T-Bond chart and saw an ABCD pattern started last September that has violated the midpoint of its CD 'follow-through' According to your rules, that means it's likely to complete the pattern by falling all the way to D at 107^15 ' a 4 percent decline from these levels. If that's the case, look out below for stocks and real estate. Am I reading this wrong?' I read it somewhat differently, John, and although I see little to celebrate, I am not so pessimistic as you. Although bond prices have been falling since last June, the bearish AB 'impulse leg' that you've measured is not what I'd call a killer wave. If it were, implying significantly lower prices ahead, the indicated point 'B' low would have surpassed the 109^00 low made in March of last year. That said, one could make the case that a large head-and-shoulders pattern has been forming for the last year-and-a-half. That would have negative implications, of course, but even if so, it will probably take another six to eight weeks to reach the danger threshold of the still incomplete right shoulder. We'll know before then whether this pattern is the real McCoy, since it would have to breach that 109.00 low mentioned above before it becomes truly threatening from a hidden-pivot perspective. Moreover, this would have to occur without an upward

From a hidden-pivot standpoint, a relapse to exactly 345.35 seems as likely for Google as an early-March snowstorm in North Dakota. Not that I would try to discourage anyone from thinking GOOG might at some point return to bargain levels. But it ain't there yet, not as far as I'm concerned, and although the premier Web searchmeister's capitalization has been shaved by nearly 30 percent since peaking in mid-January, I would caution against rushing in right now to re-acquire the stock for the long haul. (Click to enlarge) So what might this imply for the broad averages over the near term? While it's hard to imagine GOOG taking such a hit without dragging down the indexes of which it is a component, the QQQs (for one) looked like no worse than an even bet to maintain altitude for at least the next day or two. Our best shot in any event may lie in the precious-metals sector. Bullion futures in particular have been moving nicely to-target, tracing out a recuperative pattern that we expect will reward gold bugs' patience with new price highs yet again. We'll look closely at possible opportunities in some of our favorites, including Newmont, Golden Star Resources, and Gold Fields Ltd., so stay tuned. *** Disturbing Pictures From our technically astute friend Tom Tankka, here are two charts that show Big Trouble brewing, even if it is not likely to precipitate out in mere days. The first shows an Industrial Average that has been moving higher for four months even as MACD has declined. It seems highly improbable that this glaring divergence will be resolved in favor of the bulls. The second chart shows a picture-perfect head-and-shoulders pattern taking shape in the NDX. If it continues to add symmetry, a hellish drop could be expected in

Yesterday's comments in this space proved timely, since all the evidence that Helicopter Ben could need of an economic slowdown was there in spades: ebbing consumer confidence, a cooling housing market, punk GDP growth and a slowing in the manufacturing sector. The Wall Street Journal's reaction quotes implied that investors were caught off guard by the news when they dumped stocks as the session wore on. But other than CNBC-watchers, who, really, could have been surprised? Yesterday we quoted the top bond guy in the country as saying that all the statistical signs of a waning economy were there in plain sight, despite the fact that our new Fed chairman evidently would have us believe that 'inflation' is the central bank's biggest problem, not the delicate condition of the economy. (Click to enlarge) Is Bernanke the clueless wonk he appears to be, or just a bad actor? You be the judge. And if you think the Fed is going to tighten by the widely inferred 50 basis points between now and mid-May, I've got a bridge to sell you.