January 2007

I'll believe energy is in a bear market 'as opposed to a nasty correction ' when I see unleaded regular down around $1.50 a gallon. Sure, it's nice to read for a change that oft-beleaguered consumers evidently have OPEC on the run: 'An emergency meeting should not be ruled out,' a senior cartel spokesman told the Wall Street Journal on Thursday. This, on top of an earlier pledge by the ministers to cut the world's daily ration by 1.7 million barrels. Perhaps they should be holding prayer meetings instead, since a prolonged cold snap like the one reportedly tightening it grip on the Mid- and Southwest at this very moment would turn crude quotes around in a hurry. Meanwhile, traders who have been climbing over each other in the pits to unload oil contracts seem to have forgotten that a bull market in oil prices is never more than one geopolitical crisis away -- a shoulder-fired missile, perhaps, scuttling a tanker in the Persian Gulf. Barring the unexpected, though, we can offer only a grim technical outlook that sees February Crude falling to as low as 45.32 in the coming weeks. Yesterday's weakness corroborated the prediction to the extent that a minor Hidden Pivot support at 52.21 fell by the wayside. The next lies at 51.07, and if you're in the habit of groping for bottoms all the way down, you can try it there with a stop-loss as tight as four cents. *** London Seminar A Hidden Pivot seminar in London appears likely, judging from the strong initial response. If you're interested in attending a two-day class there, probably sometime in the spring of 2007, please let me know via e-mail, including your contact information. The cost would be $1,500 USD.

Even dumber than those who believe the housing bust has already run its course are those who think the Fed will be able to hold deflation at bay by 'printing money'. This is such a contemptibly stupid idea that one would think it would have no currency at all outside of the academy, CNBC and the Federal Reserve's own Open Market Committee. In fact, it represents the popular wisdom on the subject. I've done my best to dispel such notions, explaining here in voluminous detail why we could no more bail out a deflating economy with so-called printing-press money than we could avoid a collision with an asteroid by changing the orbit of the Earth. The following is an interesting note on the topic from fellow hard-core deflationist Jas Jain. He is responding to a question from one of his own readers, who has asked, 'How do you define 'printing money' and why do you seem to believe it is unrelated to the expanding money supply or credit/debt?' Here's Jas's answer, which flouts the popular wisdom with common sense: Cash for Criminals 'The Fed does print and mint currency in circulation, but it has not been increasing. (Perhaps half the demand is from those who engage in illegal activities and money laundering.). Much of it sits idle in the Federal Reserve vaults! 'Beyond that there is no printing of money by the Fed to stimulate the economy. Granted, the Fed does influence lending, or credit creation, through its interest-rate policies and supervision of the banking system. Lax supervision means more lending. The Fed can and does affect lending, but that is not Printing Money. 'During the past few years, the Fed did help grow private debt, with household borrowing being the most important stimulant to the economy. It did so by

Leave it to Apple to reinvent the cell phone. And so they have evidently, at least as far as Wall Street is concerned. Voracious investors bid up AAPL shares by more than $7 yesterday (see chart below) while simultaneously pounding those of a competitor, Research In Motion. Both stocks went crazy as Steve Jobs was introducing the iPod-based phone at MacWorld in San Francisco. The $500 device has no keypad and supposedly requires a little smarts to use. If that's the case, it could take Microsoft's geniuses in Redmond a few more months than usual to figure the thing out so that they can produce an inferior copy a year or two from now ' one that, say, displays an Excel spread sheet on a two-inch screen. Despite its spectacular surge, AAPL was not the attention grabber in the chat room. As always, bullion and precious-metal shares drove the discussion, For the record, I've revised my forecast for Silver downward slightly, to a bottom-fishable target that you can access , along with a fresh chart, on the Touts page. Concerning Gold, there seems to be more concern than is warranted. I see somewhat lower prices ahead, with a minimum 594.50 target on the February Comex contract. But the fact remains, Gold's declines in recent months have lacked the power to create menacing impulse legs on the daily chart. The bear's lack of seriousness was evident some time ago, when the ten-week fall from mid-July's peak failed to breach several key supports near $565 made earlier in the year. The chart below shows this. *** London Seminar A Hidden Pivot seminar in London appears likely, judging from the strong initial response. If you're interested in attending a two-day class there, probably sometime in the spring of 2007, please let me know

Although Monday's modest rally could be the start of a more significant thrust, I wouldn't bet on it. Look at the DJIA chart below and you can see why. Although the blue chip average recouped an opening hour deficit and then some, its intraday peak failed to surpass the 12447 high recorded last Friday. Usually, when the bull means business, it will take out some prior peak visible to the left of it. Moreover, the more obscure and seemingly insignificant the peak, the more important and reliable it often proves to be with respect to the bigger picture. This is a manifestation of what I call the 'look-to-the-left' rule, and it often foreshadows strength or weakness in stocks, indexes and averages. Under the circumstances, I doubt that yesterday's snap-back recovery will prove to have been the rally that ignited stocks in 2007. (Click on chart to enlarge) Dead Birds in Austin A bunch of dead birds found in Austin didn't make headlines, but it did capture the attention of our bird flu correspondent, Erich Simon. Here's his worst-case take on this potentially important 'little' story: 'Police just closed ten blocks of downtown Austin, Texas after the discovery of 'dozens' of dead birds! Viral tests to determine Avian Influenza to 'take weeks.' An obvious stall. Possible corroboration of my appraisal that HP H5 will arrive from the south. 'Or is it an airborne vapor contamination that dropped the birds in mid-flight? This when a deadly toxic, wide-area vapor is just now circulating in Sugarland, Texas, and a C4 bomb scare in Miami and these after a HUGE vapor cloud enshrouded upper New Jersey and New York City this morning, of unknown and suspicious origin, prompting thousands of 911 dial-ups. 'Is this the beginning of a coordinated attack? Right after the Saddam

We caught the exact low of gold's $23 plunge in the chat room Friday with a 603.00 projection, but I wouldn't count on it to hold. The good news is that a promising Hidden Pivot support lies not far below it at 594.50. It looks capable of engendering the turnaround so many have been patiently awaiting for so long. If the action in February Gold plays out as expected, it would correspond to a 40.94 downside target in Newmont Mining that was flagged here recently. (Click on image to enlarge) Even though the bear cycle apparently has further to go, we jumped on DROOY shares nonetheless, since the stock has been making its way down to a Hidden Pivot target at 0.76 for quite a while. Officially, we bought a thousand shares at 0.78 on Friday, using a relatively wide stop-loss. A trader in the chat room reported buying 100,000 shares at the low of the day, 0.76, and this may have played a role in the stock's subdued histrionics near the end of the session. The Usual Idiots We also nailed Friday's low in the mini-euro within a single tick, although the trade I'd advised was timed out. The day's first pass at the euro's Hidden Pivot target ' a brutal 70-tick plunge that occurred in the space of mere minutes ' failed by nine ticks to reach it. Thereafter, it took a little more than two hours for the futures to work their way down to the pivot, 1.3025, making their actual low at 1.3024. I didn't mention it in the chat room, but the resilience of the low could tell us whether the dollar's corresponding strength ' and therefore gold's ongoing weakness - is likely to continue. If the low is easily breached within the next day or

My short-term outlook for the precious metals sector has been negative and still calls for a drop of at least 7% in bellwether Newmont, to 40.94. Even so, we could still cross our fingers and root for a potentially important turn in the XAU as early as this morning. That's because a compelling Hidden Pivot support lies not far beneath yesterday's lows. Precise instructions for bottom fishing there with a very tight stop-loss are given in the Chat section of the newsletter, so check it out if you're interested, As it happens, we were minutely focused on the XAU Gold & Silver Sector Index all day in the chat room, since many of you seemed more than a little interested. The discussion began when someone asserted that the XAU, currently trading around 134, would see 150 before 117. I'd take the odds on that one, and I explained why in some detail. In brief, though, the failure of the index to take out September's 153.15 peak on its last rally left me with a mildly bearish bias. Mind you, I don't see any catastrophes ahead, only a continuation of the correction that has constrained bullion and precious-metal shares since May. (Click to enlarge) Whatever happens, there is no reason to be anxious about it, since I've also stated very precisely what would cause me to change my mind. For if Gold is indeed ready to turn around in a big way, it cannot possibly do so without signaling us on the intraday charts. A bullish impulse leg on the 15-minute chart is all it would take to get me cheering with the crowd, but until I see such a thrust I will continue to view precious-metal stocks with the same heartlessness that I have always tried to bring to my analysis.

So here's the score after one day of trading in 2007: Da Boyz 1, Public 0. Wednesday's deftly managed volatility was nothing short of breathtaking ' a day when even the savviest traders may have found themselves bamboozled at key turning points. Rick's Picks subscribers had a live play in IBM by way of some call options that we still hold. The stock surged to within a mere three cents of a predicted Hidden Pivot top at 98.43 after having begun the day deep in the hole. Although the rally, sharp as it was, would not have permitted the short sale of January 105 calls for 0.40 as advised against our Jan 100 calls, it at least gave bulls a chance to take partial profits near the exact intraday peak. This some subscribers evidently did, and a chat-room participant reported closing out some Jan 100s for 1.15 -- 65% more than we paid for the option in mid-December. Once IBM fulfilled its target it fell precipitously like hundreds of other stocks. But it was in the precious metals sector where we saw some of the most punitive reversals of the day. Most mining stocks had opened promisingly, spurred by a rally in Gold futures that saw the February contract trade nearly $9 above last Friday's $639 settlement price. Newmont, for one, was up more than two percent on the opening, recording a high of 45.67. But by day's end it had fallen sharply, touching a low of 43.73 before rallying weakly to close down 0.95 on the day. Another favorite, Goldcorp, fared even worse on a percentage basis, ending the day at 27.38 after a 1.06 loss. (Click on chart to enlarge) Difficult as the market was to trade yesterday, we needn't feel the least bit anxious about what might lie

Happy New Year and warm greetings from Colorado, the snow capital of America! (with apologies to subscribers from Buffalo). I high-tailed it home from Vail a couple of days earlier than planned, since I didn't want to risk getting stuck in the mountains, estranged from my wife and kids, on New Year's Eve. I'd left her with the more snow-worthy of our two cars, but she decided not to come up as planned, fearing she'd get stuck in traffic. It might have been much worse than that for her, since, around mid-day, the interstate was closed to westbound traffic about 20 miles shy of the Eisenhower Tunnel. I was headed in the other direction, white-knuckling my way past some spinouts and spectacular accidents on I-70. One involved about 15 cars, quite a few of them spectacularly mangled. A few days earlier, on my way up to Vail, I got stuck in a snowy ditch myself when dropping my younger son at a friend's ski house near Breckinridge. My car, a front-wheel drive Nissan with regular tires, got so deeply wedged in snow when it spun out on a turn that I thought it might sit there till spring. A friendly guy in a big Chevy pulled me out, though, and I was on my way after just an hour's delay. Flying Smart I was able to spend only a few days in Vail, but the skiing was great. Blizzard #1 somehow managed to bypass the mountain resorts, but there was plenty of cover on the trails that I skied, including China Basin and Blue Sky. I skied with my best buddy and his teenage daughter. His outbound flight (from New Jersey) had been canceled like everyone else's, but he instinctually and quickly rebooked passage to Phoenix (not Albuquerque as I'd mentioned