June 2007

Yamana shares didn't exactly soar after we bought them yesterday (see chart below), but because we got in a penny off the intraday low, we can afford to be patient. Here's the recommendation exactly as it appeared in the Touts section of yesterday's Rick's Picks: 'We came away empty-handed yesterday, but let's try a somewhat different strategy this morning, bottom-fishing with risk tightly under control. Using a Hidden Pivot support at 12.34, we'll bid a penny above it for 200 shares, stop 12.29.' Yamana subsequently settled at 12.53, eighteen cents above where we got in, but it would need to hit 12.87 today or tomorrow before we could sit back and enjoy a presumably untroubled ride to a nice profit. Speaking of being patient, we received a note yesterday from our good friend Chuck Cohen, whose unequivocal enthusiasm for mining stocks has always been tempered by the insight that smart investors rarely get rich overnight. Chuck thinks a mania in precious metal shares is still a ways off, but he's quick to add that it is never too early to stake out speculative positions ourselves in some of the more promising companies. I've listed three of his very favorites in the Intraday Notes section of today's newsletter, including a penny stock operator with some potentially lucrative properties in Ghana. I expect that some of the precious metals experts who hang out in the Rick's Picks chat room will want to dissect these stocks forthwith, but I'll likely limit my own contribution to the technicals, since that's where I am most comfortable. Don't Read This If� Chuck is bullish as all get-out on U.S. equity shares, a stance with which I must reluctantly agree, notwithstanding the disastrous look of the U.S real estate market and the upward skew in rates. Although I

I reaffirmed my long-term bullish outlook for Gold here yesterday, but without preparing you for the worst over the next 2-3 weeks. With August Gold currently trading around $651, I am now projecting a decline to at least $638, a Hidden Pivot target that will remain valid as long as the futures don't rally above $679 first. If correct, that would imply a fall of about 2% from current levels. If and when the August contract comes down to the target, I'll provide explicit trading instructions for subscribers who would like to initiate or augment a long position, or perhaps cover a short one. (Click on chart to enlarge) The bearish target is not chiseled in stone, but the evidence is strong at the moment that it will take at least somewhat lower prices to shake out the last of the nervous nellies. We would have to re-think our bearishness, however, if the futures were to thrust above two prior peaks in the manner described here yesterday. For that to occur this week, August Gold would need to surpass the two peaks shown in the chart above, the higher of which is 661.40. Nibbling at Yamana In the meantime, we'll continue to nibble at mining shares whenever we can do so with relatively little risk. We attempted this painlessly in Yamana Gold yesterday with a buy-stop entry, but the stock headed lower, negating our strategy. Here is the actual recommendation, from the Touts section of Tuesday's Rick's Picks: 'Assuming Yamana doesn't dip beneath yesterday's low at 12.84, the stock could be ready to pop to 13.67. The midpoint resistance associated with that Hidden Pivot is 13.25, implying you could get long on a 13.27 buy-stop. A more conservative way to get aboard would be to buy the stock on the

The chart below shows why, although our near-term outlook for Gold is negative, we view longer-term prospects more optimistically. Our analysis hinges on an elemental rule that anyone can easily learn to apply. The rule states, simply, that new uptrends or downtrends begin with 'impulse legs' that surpass at least two prior highs or lows. This rule is at the core of the Hidden Pivot method, and it allows us to anticipate Gold's next big move without ever experiencing even a slight twinge of anxiety. To someone even passingly familiar with the Hidden Pivot method, the question, 'What do you think about Gold right now?' is superfluous, since the answer depends on what time frame we are talking about. In the chart, there are numerous uptrends and downtrends of various magnitudes playing out simultaneously. To sort them out in a way that can tell us exactly what Gold is up to, we need only identify impulse legs both bullish and bearish, then rank them according to their significance in visual terms. An Eye for Art Because the technique is visual rather than mathematical, and because it eschews such conventional terms as trendlines, support & resistance, oscillators, and even volume, I like to tell students that learning to read a chart is akin to developing an eye for art. With a little bit of practice, one can reach a point where a chart simply 'looks' appealing from a bullish or bearish perspective. (Click here for your free copy of 'About My Method,' a detailed discussion of the Hidden Pivot Method.) Moreover, when a big move is coming it cannot possibly occur without tipping us off with a thrust exceeding the requisite two prior highs or lows. Knowing which prior highs/lows are important requires a certain adjustment of the eye, but making

Some bimbo at Fox News opined the other day that Paris Hilton had helped make this a better world, but we'd rank the It Girl's contribution to humanity somewhere between that of malaria and dwarf-tossing. Why on God's Earth are the news media so obsessed with her? It surely isn't because the public can't get enough of her simpering smile and preening narcissism. To the contrary, as far as one can tell, Paris Hilton is universally despised. You should have heard the audience boo the mention of her name on Conan the other night; the jeering went on for a good three or four minutes. The extended insult was supposed to have been a joke ' one which Conan encouraged by sauntering off the set for a quickie massage and a drink at the water cooler. But the audience's hostile reaction was extraordinary -- not only for its uncharitable lack of brevity, but for its rabid vehemence, which surpassed both in malice and volume the famously nasty reception Britney Spears got a few months ago when her face popped up on the Jumbotron at a Lakers game. Sexual Liberation A generation ago Paris would have been know as 'that slut' to her debutante friends and the untold legions of fratty boys who would have known her intimately. However, her notoriety would have gone no further than that, and she would have achieved her 15 minutes of fame as a thinly fictionalized character in a Truman Capote novel. Nowadays, though, feminists having banished the word 'slut' from politically correct discourse, Paris Hilton has become a Western icon of sexual liberation, and, far from being ostracized by polite society, she has become a ubiquitous if unbeckoned presence among us. The tabloids and TV networks act as though we are endlessly fascinated by her when in

Is the bull market over? Ask us again in six months, since anyone who would even deign to answer that question is blowing smoke. Even so, it is growing increasingly difficult to ignore the evidence that the bull has started to crack. Yesterday, for instance, the S&Ps recorded their biggest drop in nearly three months. That in itself is no catastrophe. But from a Hidden Pivot perspective the decline was ominous for two reasons. For one, as shown in the chart immediately below, it surpassed two prior lows on the hourly chart and very nearly exceeded a third, creating a quite powerful bearish impulse leg in the process. While this may not spell the end of the world, it does strongly hint that the intermediate-term trend has turned bearish and could endure at least through the summer. For two, the S&P futures fell without having achieved a 1547.50 target that we had all but chiseled in stone. The actual high, recorded three days ago, was 1543.00. Patience Fails Now, a 4.50-point shortfall may not sound like much. But it marks the first time since February that a rally cycle in the S&Ps failed to achieve a target on the hourly chart. Previously, such thrusts were hitting Hidden Pivots to the exact tick and with such reliability as to constitute a source of easy money for the patient trader. This time, however, patience was left choking on dust when the futures failed, by fully 18 ticks, to get where they were going. Something has changed. We had an inkling of yesterday's kamikaze dive on Wednesday, when a decline in the Mini-Dow exceeded a prior low by five points (see chart, above). At the time, I noted that, as close together as the two lows were, it would be a mistake to

We've gone disdainfully against the trend twice so far this week, risking bupkus while buying shares of Yamana Gold and shorting Fannie Mae. Yamana is a favorite in the Rick's Picks chat room and gets hyped daily, but it had been a while since we last took a bullish position. Here's the actual recommendation as it appeared in the Touts section of Wednesday's edition: 'If the ever-popular Yamana pulls back a bit more this morning there are two Hidden Pivot supports where we might attempt to get aboard for the next bullish push: 13.78 and 13.51. You can try at the higher number, a midpoint, with a 3-cent stop-loss, but officially we'll bid a penny above the lower, at 13.52, with a 13.49 stop-loss, 400 shares. If you'd prefer to substitute options for stock, the July 15 calls (AUYGC) would be a quite decent buy for 0.35.' As it happened, Yamana bottomed at 13.53, a single penny above the target, and the calls traded down to 0.35, allowing us to acquire either or both at a promising low. As always, we nailed down a partial profit early on, so that even if we get stopped out now slightly below where we got long, we would still do no worse than break even. The trade looked quite promising by day's end, since the stock rallied 32 cents, to 13.85, in trampolining from our predicted Hidden Pivot support. Fannie a Ripe Short Fannie Mae shares were just as obliging, allowing us to load up on put options just as the underlying stock was making its exact high on Tuesday. Here's the recommendation as it appeared in Tuesday's Touts: 'Fannie Mae will reach potentially short-able ripeness if and when it gets to a Hidden Pivot resistance at 67.91 that was noted here earlier.

The Dow Industrials fell 81 points yesterday, but we view the relatively light damage as a sign of strength, considering the news. Profit warnings were issued by several retailers, and Helicopter Ben was on the tape with yet more 'worries' about 'inflation.' For a guy supposedly steeped in the lessons of the Great Depression, it's amazing that the ongoing collapse of the housing market has yet to shift his attention to the real economic threat of debt deflation. There was a related, negative development in the bond markets, as yields on the 10-Year Treasury Note crept toward the 5% level. Since mortgage rates take their cue from this instrument, it portends even greater pressure on the already imploding real estate sector in the coming months. Higher rates will be weighing not only on home sales, but on the many millions of homeowners with adjustable-rate mortgages. Of course, all of these pathological woes have been metastasizing for some time without dampening investors' ardor for stocks one bit. This shouldn't surprise anyone, given that the stock market is in the midst of a full-blown mania ' one as impervious to danger signs as a crack-addict to the warning label on a pack of cigarettes. We surmised long ago that the stock market had lost its ability to discount trouble in the accustomed way -- i.e., by falling. Private equity deals alone have removed hundreds of billions of dollars worth of shares from the market in just the last year or so, shrinking supply and making it possible for even relatively tepid demand to drive the broad averages higher. In the absence of any more shards of disturbing news this morning, we should expect tepid demand to rule the markets once again. It may take investors a little while to get used to

Our targets for both the Dow and the QQQs are well above current levels (see the Rick's Picks archive as well as the 'Actionable Advice' list for precise numbers), so we'll be looking for buying opportunities in the coming days and weeks as we wait for bearish prospects to ripen. Keep in mind that our goal is not to catch the Mother of All Tops, whose onset no one can time, but rather to leverage the short side of a very mature bull market whenever the risk of doing so is lowest. As we have seen numerous times, it is possible to make money on both sides of a raging bull, even if it is often more difficult to trade with the dominant uptrend. The reason this is so should be obvious: Because 'everyone' is bullish right now, stocks must move in increasingly vexatious and bedeviling ways to prevent 'everyone' from getting rich by simply acting on the obvious fact of a runaway bull market. (Click on chart to enlarge) In practice, this means it can often be less challenging to score occasional gains of 10-15 points shorting the S&P futures in an uptrend than to ride them steadfastly higher for the longer-term, 50-point gain. But if it were easy to get rich simply by employing a buy-and-hold strategy in a bull market, everyone would do so. In reality, the inevitable swings against bulls from time to time are so ferocious as to make it very difficult to stick by one's guns, even when we 'know' the bull is dominant. Riding the Bull We've all heard tales about some commodity trader who made a fortune riding a bull market in corn, or coffee, soybeans or some other vehicle that went ballistic, as stocks are doing now. But if you were

Let me reiterate my strong conviction that GOOG is not the world-class company that gung-ho investors seem to believe it is. As we know, the firm proved early on that it is morally gutless by caving to the Chinese on issues of censorship. (So, recently, did Yahoo! See below.) Google has also shown little desire to interact in any way with its customers, even when serious security breaches are at issue as detailed in the chat room earlier. Rather than deal with such problems, they send out form letters that render them about as approachable and helpful as the Great and Powerful Wizard of Oz. But what really surprises is that Google, which supposedly hires only the cream of the college crop, has botched basic programming jobs that would barely challenge a seventh grade hacker. Take their Documents and Spreadsheets page, for example. It represents a key step toward the company's goal of generating revenues from a source other than advertising, which so far is the only way Google has figured out how to make money. Put an easy-to-use spread sheet on the Web, add some cool features such as shared viewing and virtual collaboration, and you can lure jaded Excel users away from Microsoft Office. At least, that's the theory of it. In practice, however, Google has created a Web-based spreadsheet that is such a botch job it makes a Windows beta release look like the latest killer app from Apple. How Buggy Is It? How buggy is the Google Spreadsheet? Put it this way: If Microsoft had developed the product to sabotage Google's reputation, they could not have created a more effective Trojan Horse. Spreadsheet collaborators are locked out for no apparent reason and without warning. Spreadsheets that you have created and saved mysteriously disappear, only to reappear