July 2007

Speaking as a gold bug with a gimlet eye, it may be a good time to ratchet down our expectations, seeing the glass as half-empty rather than half-full. Let's start with the XAU chart below, which I recently trotted out in support of a 5.5% rally forecast. When you look at the chart, do you see a bullish impulse leg that has rocketed past no fewer than four prior 'external' peaks? Hard to miss it, for sure. It's what I saw a few days ago when I predicted even bigger and better things ahead. But there is another Hidden Pivot interpretation of this chart ' one that should smack the eye of the Gloomy Gus who dwells in the heart of each and every gold bug. (Click on chart to enlarge) What Gloomy Gus would notice first is not the initially promising trajectory of the rally begun a few weeks ago, but rather the subtle failure of that rally more recently to surpass the April 20 high, 148.50. In Hidden Pivot terms, this tiny 'look-to-the-left' peak looms large in any technical discussion of gold's prospects over the near term. The rally was not lacking in ebullience, for sure. What it manifestly lacked, however, was the guts to take on just one more 'easy' peak before pausing for breath. This has subtle importance for Hidden Pivot seminar grads, who may be quicker than I to recognize the problem because it receives greater emphasis in class than I sometimes bring to my own analysis. We dwell on XAU's 'look-to-the-left' failure in retrospect, having bailed out of a long position in Newmont Wednesday morning. We did so in haste, posting the following to the Rick's Picks Touts section as the Denver-based mining giant was beginning to do what it does best ' i.e.,

We bailed out of our short position in Apple early yesterday, sidestepping the punishment the stock was to inflict on bears later in the day. Although the Dow Industrials got socked for a 150-point loss, Apple was up as much as $4 intraday. This would not have surprised anyone who parsed our commentary here the night before: 'End of day action in AAPL shares,' we wrote, 'suggests the whack-jobs will be out in force Tuesday, providing short-squeeze fodder for the dirt-bags who manipulate this stock for a living.' Whack-jobs and dirt-bags, indeed. I was arguably one of the latter, in theory if not in practice, when I worked as an option dealer on the floor of the Pacific Stock Exchange for about a dozen years. But I don't recall thinking of myself as a predator back then, only as the prey of the far weaslier dirt-bags who worked for Goldman Sachs, Morgan Stanley, Bear Stearns et al. The Knowledge Secret My grudging admiration for the weasels at one of those firms in particular goes back to the early 1980s. On one memorably hectic Friday afternoon, a floor broker who worked for the firm came into my pit to buy some call options on Resorts International (RTA) about 60 seconds before the closing bell. To say that this brokerage firm traded RTA options knowledgeably would be a bit of an understatement. Maybe that's because they were also the casino operator's investment banker at the time. Anyway, this particular trade, occurring as it did just moments before the closing bell, and anticipating a turn of events in Resorts shares that, to say the least, proved most fortuitous for the firm's customer, was just a little too weasely for me. So much for honor among thieves. I rang up a friend at Barron's,

Our small, short position in Apple has produced a paper gain of more than $1,000 since Friday, when we advised the trade. We used a Hidden Pivot resistance at 133.43 that appears to have been well worth the wait, since it came within 35 cents of nailing the so-far all-time high in the stock, 133.78. The pivot also anticipated a doozy of a selloff ' a pullback of nearly $5, or about three-and-a-half percent, from the peak. (Click on chart to enlarge) While it's still too early to tell whether Apple's bull-market top is in ' and our hunch is strongly otherwise ' the goal of shorting a much-hyped high-flier without getting hurt has been achieved with little stress or anxiety. Like the magician who catches a speeding bullet between his teeth, our feat was ultimately just a cheap parlor trick ' i.e., finding a Hidden Pivot we could trust to arrest Apple's parabolic ascent. Now, to protect our gains, we've deployed a stop-loss at 131.92 for the hundred shares that remain in our position. Why there? Simply because a print at that price would create on the lesser charts the kind of bullish impulse leg that would telegraph new record highs to come. Newmont Demands Patience We've been less successful lately in Newmont Mining, which has risen only six cents since we bought the stock on Friday. Our bullish play initially got a boost from a simultaneous breakout in Comex Gold. The breakout was not unanticipated, as you could infer from the following analysis. It went out to Rick's Picks subscribers on Sunday night: 'Any rally that surpasses the tiny look-to-the-left peak at 662.00 shown in the accompanying chart would make August Gold start to look interesting, since that would create a subtly bullish impulse leg on the hourly chart.

Searching billions of web pages, we were unable to find even a single stock chart showing the spectacular ascent of RCA prior to the 1929 Crash. (The one shown at bottom will give you a rough idea, though.) Our hunch is that the final, manic leap of 'Radio,' as it was popularly known, would bear a striking resemblance to the world-beating parabola shown in the Apple Inc. chart immediately below. Like RCA before it, Apple Inc. has come to be perceived as an innovator with nearly limitless potential in the consumer electronics/entertainment market. Perhaps this will prove to be no exaggeration. Even so, we remain unpersuaded that the company's latest sensation, iPhone, is destined to dominate its product category as iPod did, nor do we share the apparent belief of many investors that Apple stock will turn out to have been a fabulous bargain at these levels. (Click on chart to enlarge) Having said that, we must acknowledge that the prospect of Apple eventually overtaking Microsoft is hardly unthinkable. To the contrary, we see it as inevitable ' not so much because of Apple's genius, but because of Microsoft's bottomless stupidity, arrogance and ineptitude. Microsoft, after all, is the company that most recently brought us Vista, yet another overhyped Windows operating system that's about as 'new and improved' as a dish detergent to which lemon scent has been added. At least the detergent doesn't take two-and-a-half minutes to 'activate' when you squirt it onto a sponge. Vista has been selling briskly, of course, but only because it is being rammed down our throats by the likes of Dell, Hewlett Packard and Gateway. But would anyone dispute that each successive Windows operating system finds buyers increasingly resistant and resentful? Buggy Game Console Microsoft is also about to take a billion-dollar-plus hit for

Stocks marched patriotically higher on Tuesday as anticipated, but the rally was not quite strong enough to get us short intraday as we'd recommended. Our bullish targets for the Mini-S&P, August Crude and the QQQs will remain valid when the markets open and begin to feign activity today and Friday, but we should be extra cautious about laying out shorts that we would not in any case be carrying over the weekend. AAPL shares failed as well to reach our rally target even though maniacal buying drove the stock nearly $6 higher on the day. Our goal is actually a double target representing two important Hidden Pivots that are closely coincident. Both come from the weekly chart, and that is why we have suggested shorting VERY aggressively if and when our magic number is reached. We remain quite confident that AAPL will do exactly what we expect of it, so if you've been carrying a long-term position, the stock's presumptive last gasp offers the best opportunity we've seen in a long while to adjust positions by way of some always-patriotic profit-taking. We are in fact so confident in the target that it should be viewed not only as a great place to take profits or to get short, but also as a minimum upside objective. To repeat: Apple WILL get there. However, if it should push more than 10-20 cents above it, we would have to consider the possibility that Apple is in a parabolic blowoff that could eventually resemble the one traced out by the shares of Radio Corp. in the months leading up to the 1929 Crash. Regarding gold, we've been bullish each mincing step of the way lately, but yesterday's dive was not difficult to foresee if you applied a simple Hidden Pivot rule. Notice in the

Remember the joke about Russian workers and their Communist bosses? 'We pretend we're working and they pretend they're paying us.'? Now it's the American worker's turn to play make-believe. With July 4th falling on a Wednesday, this week was over last Friday as far as U.S. productivity is concerned. On Wall Street, the bulls won't even have to pretend they're working. Indeed, 'seasonality' is so blithely powerful at the moment that rallies will tend to happen almost by themselves, as though willed by some cosmic force as oblivious to reality as the dolts and shills who champion stocks each day on CNBC. Take yesterday, for instance. In the 390 minutes from bell to bell, the S&Ps did nearly all of their correcting in about 20 of those minutes; the other 370 were spent with stocks moving either sideways or higher -- much to the torment of those who had bet Friday's remorseful price action would spill into July. Not a chance. Or at least, statistically speaking, not a very good chance. From a Hidden Pivot standpoint, there were no surprises in Monday's wilding spree. Around mid-morning, we posted a note in the chat room reminding you that the E-Mini S&Ps were about to touch a 1523.25 correction target. As you can see in the chart above, they did so with two-decimal-place precision. What this implies is that tomorrow, when stocks resume their patriotic waft aloft, we can assume the E-Mini-S&Ps will be bound very precisely for the Hidden Pivot rally target that is 1523.25's soul-mate. In the Touts section of Tuesday's newsletter, I have identified this target and made it a Pick of the Day. It is for those who are stuck in the office while the boss has gone off to screw the pooch. I dimly remember that feeling myself. This

When the Mini-Dow futures broke above 13600 on Friday not long after the opening bell, we put out a bulletin in the chat room predicting they would reach a minimum 13680 shortly thereafter. The initial A-B thrust looked pretty powerful from a Hidden Pivot perspective, surpassing no fewer than three previous peaks that had been made earlier in the week. But no sooner had the futures broken through the clouds than they turned 180 degrees and plunged back to Earth. Here it is on a 15-minute chart: (Click on chart to enlarge) You could chalk it up to end-of-quarter volatility, or subprime jitters, but any way you cut it, the Dow Industrials failed to convert an unusually strong opening into a romp-and-ream-'em running of the bears. We should be asking ourselves, when is the last time we've seen Da Boyz pass up an opportunity like that? But, you say, maybe stocks simply ran out of gas after the opening flurry. We don't think so. The turn from the morning's highs was so sharp that it looked more like a failure of nerve to us. In our experience, and absent any Friday Follies-type news, powerfully impulsive rallies do not simply blow past three prior peaks, only to reverse just as sharply and dive for cover. We'll say it once again: Something has changed. The volatile swings that are beginning to manifest themselves with increasing frequency on the lesser charts hint that something bigger is disturbing investors. We shall see. With the Fourth of July holiday just a few days away, seasonality is due to ratchet up bullishness to an irresistible pitch. If the Indoos can't punch through to new highs next week, or at least rattle shorts' cages a little, our suspicion will only grown that the bull has been infected with a