September 2007

Our immediate target for December Gold is 736.80, but we didn't expect it to get there so quickly when we aired the forecast last week with the futures trading in the low 690s. Rick's Picks subscribers who joined yesterday's free Hidden Pivot tutorial session on Webex got to see the bull trend go vertical in real time when, early in the session, the Comex December contract surged more than $8 in a little more than 20 minutes. We were looking at a tick chart at the time, making the action look all the more frenetic. With the futures midway to what turned out to be their intraday peak, we came up with a 723.40 target in real time, and although that Hidden Pivot resistance was eventually exceeded by 40 cents, it contained yesterday's move. But not for long, we expect, since the subsequent pullback was relatively shallow, and Gold was giving up ground only grudgingly in early evening trading on Tuesday. The next push should take the December contract to the 736.80 target, and we have provided instructions for leveraging it if and when it is approached. Precious metal shares were nicely in gear yesterday ' so much so that our stingy bid for shares of Yamana Gold went begging. We were looking for the stock to complete a downtrend to 10.88 off an 11.33 close, but the stock bolted out of the gate, gapping to 11.50 on the opening bar and never trading lower than 11.37 intraday. Newmont performed with equal aplomb, with a nearly 3 percent rise, and Goldcorp did even better, with a gain of nearly 4 percent. We expect the miners to continue to rise in sync with metal quotes, but if you're interested in precise targets for some of the most widely watched bullion stocks,

With a full-blown real estate crash perhaps no more than five or six months away, and the black clouds of recession-or-worse massing on the horizon, you have to wonder what kind of dolt would be buying stocks at these levels. The simple answer is that it is not dolts, but bears covering shorts, who are providing nearly all of the buoyancy these days. For, even the reckless bozos who manage OPM are not so genuinely bullish that they can come up with passable excuses for adding stocks to clients' portfolios. The fact that the rallies are 95% short covering, with option-related hedging accounting for the rest, makes the stock market entertaining to watch -- assuming you're on the right side of it. Visually obvious support and resistance is where most of the rallies begin and end, and the leveraging of these swing points to manipulate shares, usually by "running the stops," has dominated the action for longer and to a greater extent than I can recall in more than 30 years of trading. Getting Our Wish However, while it is one thing to know what is causing stocks to behave so mischievously, it is quite another to convert this knowledge into easy profits. Yesterday, for instance, looking to short any rally that poked its foolish little head up, we got what we wished for on the opening. Actually, we got a little more than we'd wished for ' enough, as it turned out, to send us scrambling for cover before the session was barely 15 minutes old. Google in particular had our number, gapping nearly $3 on the opening to 522.07 to stop us out of a short we'd got off at 521.80, stop 522.01. The E-Mini S&P showed no mercy either, making its intraday high at 1465.50 on the

We've had quite a run calling the swings lately in Comex Gold. Most recently, on Friday, a trade touted as the Pick of the Day caught the low of a $15 rally within a dime. Here's the recommendation exactly as it went out to subscribers on Thursday night: 'Gold continues to move each day as though commanded by Hidden Pivots. My minimum rally target [for the December contract] at the moment is 736, a number broached in the chat room yesterday. More immediately, a lesser uptrend points to 713.50 today or tomorrow. Let's try and catch a ride, bidding 701.40, stop 700.90, good till 8 a.m. EDT. This is a possible overnighter, and it is geared toward leveraging a minor 'D' retracement target (see chart) that was playing out Thursday evening.' We put out a chart that showed why we liked 701.40 as a place to get long, but here is another that shows how it all turned out after December Gold bottomed at 701.50: Nailing swing highs and lows can be challenging when Gold is stuck in a range, but because it has been trending strongly in recent weeks we've been able to do some profitable joy-riding with very little stress. In this case, with a quite bullish forecast for the next week or so, we watched as selling pressure abated in thin trading early Thursday evening. While the night session is regarded by many seasoned traders as predatory, it is often ideal for our purposes, since the sometimes fragile Hidden Pivot targets that we use to get long or short are not much affected by low volume, unless very low. Low liquidity can make a trade riskier when stop-loss orders are used, as they should be, but Gold trades with sufficient volume overnight that this hasn't presented much

Will the Fed vote to loosen when it next meets on September 18? It seems almost a foregone conclusion on days when the stock market is getting pummeled, often because of depressing statistics from the housing sector. But what about days like yesterday, when shares were getting short-squeezed higher, strong retail sales were being reported for August, and gold was thrusting above $700 for the first time in months? On such days, Wall Street's addictive craving for more liquidity seems to recede into the background, along with rumors such as the one that has the Fed cajoling all of the major central banks to loosen along with us so as to avoid a run on the dollar. Our friend Larry Amernick, editor of The Amernick Letter [click here for a free sample], has argued for months that there is already plenty of liquidity in the system and that none of the central bank's economic benchmark call for more. In fact, he notes, a not insignificant amount of borrowable funds has been going unborrowed, as evidenced by a recent spike in banking system net free reserves. He further notes that the recent detumescence of this number implies that banks have broken the log-jam and are borrowing and lending more freely once more. Jobs Report Crucial 'There's not enough evidence to loosen,' he says, nor would doing so much affect the still-skittish commercial-paper market over the near term. Amernick is betting that if the employment numbers due out Friday are strong, it will all but kill the chances of a cut in the federal funds rate. One of our regular correspondents actually believes the Fed is about to tighten. 'The price of gold gapped up to 705 [yesterday], and now Bernanke is taking notice,' writes Erich Simon, a whose bird flu reports

Frazzled bears got a chance to relax Wednesday on news that pending home sales had fallen far more steeply in July than anticipated. Unnamed 'economists' reportedly were 'expecting' a drop of about 2 percent, but the actual figure was more than six times that, 12.2%. The Dow Industrials fell 200 points during the day as a result, and although the blue chip average recouped some of that on uncharacteristically mellow short covering, settlement was still an ugly 143 points below the previous day's close. We don't personally know any economists who were expecting a mere 2% decline in home sales, but it suggests that there are at least a few out there who live in a warp. CETA holdovers, perhaps? Friends of Larry Kudlow? Whatever the case, it seems obvious that they haven't been getting out much lately. Neither, I would surmise, has my otherwise astute pen-pal Fred, a Bostonian who thinks a cheap dollar will continue to suck a torrent of foreign money into U.S. real estate. He may be right about that, at least for a while, but I would disagree on whether it will suffice to push real estate prices higher more or less forever. Upper East Side Miami Beach and New York City's Upper East Side are two other places where foreigners have moved far too much speculative money into residential real estate.  You ought to see all of the unoccupied condos in my friend Ellen's building in Bal Harbour -- and the mega-complex of residential high-rises under construction by Trump a couple of miles to the north. A big bust is taking shape in both places, for sure -- and what a pity so many of the owners will never have much enjoyed the accommodations for which they paid so dearly. Upper East-Siders reportedly are

I'm headed back to Denver this evening after a a week in the Bay Area that was part business, part pleasure. The highlight of the trip was a free concert in Golden Gate Park on Sunday commemorating the Summer of Love 40 years ago. I lived in San Francisco for more than 20 years until 1999, and both of my sons were born there, but I was 3,000 miles from Haight Street, working as a lifeguard in the Atlantic City area, during the summer that hippiedom was in full flower. The concert brought together some of the local rock superstars of that era, including my favorite, Lydia Pense, the lead singer for Cold Blood. Her blues/funk/gospel-rock style has lost nothing since I last heard her years ago, and the musicians behind her on Sunday sounded even better than they did in the 1970s, when Cold Blood got its start. Some of her side men looked too young to have been around then, but the new guys could have held their own in any stadium, especially the organist, who showed his chops on a Hammond B-3 that was so amped-up that even the seismologists must have known he was in town. They put up an amazing wall of sound while Lydia shuckled around the stage, all 60 inches of her, loosening her bones. Even for those who have seen her perform, and who know how powerful her voice is, there was a question of whether she could project it past such a high-energy ensemble. But she did, closing the show with the best set of a day that had included Jefferson Starship, Taj Mahal, and quite a few other worthies. Her amazing voice was beautifully preserved, and my guess is that she only takes it out of its jewel box for

We congratulate the estimated 80,000 homeowners who could conceivably benefit from the mortgage bailout announced on Friday, but our guess is that not many big lenders, including the banks of Europe and Asia, are sharing their sense of relief. On hearing the news, Wall Street responded initially with a gratuitous 200-point rally in the Dow. It was not a sense of rejoicing that caused this effusion, however, only yet one more short-covering panic by bears worn to a frazzle by the ongoing dog-and-pony show of crisis management as practiced by the Federal Reserve, and now by the Bush Administration, which announced the plan. Sanity seems to have returned near the end of the day, when practically half of the stock market's gains evaporated in the final 30 minutes. The selloff suggests that at least some investors' obsidian hearts may be in the right place after all ' i.e., in the pits of their churning stomachs. But while the Fed would have us all see a rash of manageable problems in the mortgage sector, there evidently are a few gimlet-eyed observers who can make out the specter of Godzilla looming in the fog. Surely no one would have been fooled by the spin that President Bush, Helicopter Ben and HUD Secretary Alphonso Jackson tried to impart to the mortgage situation in their separate speeches to the nation on Friday morning. All insisted that the rescue package was designed to help the little guy rather than those damnable real estate speculators who brought this ugly mess upon us. In truth, though, and by and large, we are a Nation of Real Estate Speculators, and any policy that would seek to ameliorate the woes of one kind of speculator before those of another has ventured chest-deep into the quicksand of moral hazard. Didn't Read Fine