September 2008

A week in San Francisco has rejuvenated our spirits -- not that the scenery in Boulder has ever failed to inspire. It has also given us a fresh perspective on the matter of 'What will save America?' We invited readers to submit essays on the subject, but no one advocated what might be called the San Francisco approach: build houses and skyscrapers in a place where there are spectacular panoramas in every direction, then add cable cars. Location, location, location, as the old business adage goes. But could such a thing be made to work in, say, Centralia, Kansas? Probably not. But who knows? Install cable cars in Death Valley, or in Cincinnati, or Milwaukee, and the tourists will come, probably. They are here in droves, for sure, even the day after Labor Day. How did so many people get the day off? No one sauntering around Fisherman's Wharf is speaking English, as far as I can detect, but there seem to be plenty of Scandinavians, Latin Americans and Russians. The biggest draw on the Wharf is the hundreds of sea lions who congregate alongside Pier 39. They weigh between 600 and 1,500 pounds apiece, which explains why commercial fishermen have to go well outside the Golden Gate to cast their nets. Once these big guys have had breakfast and lunch, there's probably not much left in the Bay to eat until the next tide rolls in. Speaking of the tide rolling in, a cloud of marijuana smoke has just wafted into the North Beach caf�, Mario's Bohemian, where I'm seated next to an open window. The perpetrator is a videographer whose work is well known, both on and off the web. Seated at the table immediately behind me is a woman who looks like a young Ingrid Bergman. She

Night owls can try bottom-fishing a midpoint pivot at 1268.75, stop 1267.75, provided 1277.75 has not been exceeded to the upside first. I've reproduced a chart that shows this subtle pattern as of about 2:30 a.m. EDT. The support is clear enough that if it's breached, we should infer that more weakness is likely to follow. _______ UPDATE: The futures popped to 1279.75 overnight, negating the trade, before sinking to a low a tick beneath the midpoint support. It's subsequent breach hinted of more weakness to come.

The 20-point rally off yesterday's lows must be judged a failure, since it couldn't quite get by an 814.80 peak made earlier in the day. Now, to avoid a false alarm, let's set the bar at 822.50 to tell us when to turn short-term bullish. A print there today would surpass a subtle external peak (see inset), creating a bullish impulse leg on the lesser charts. If the futures instead head lower, trading beneath a midpoint support at 801.60, they would be indicating more downside over the near term to at least 788.70. _______ UPDATE: Gold's pernicious $20 rallies -- including this morning's from 793.70 -- should fool no one, since each is failing to create a bullish impulse leg on the hourly chart.

A bullish trigger analogous to the one I've flagged for December Gold lies at 13.345, a tick above an important peak made on the way down Tuesday. Once above it the futures would have additional upside potential over the near term to as high as 13.495. There is one additional resistance at 13.235, and if it is easily exceeded, that would shorten the odds of a push to the 13.345 trigger.

A high early Wednesday morning at 78.55 came within two ticks of a Hidden Pivot target at 78.77 that was 24 hours in coming. If the target has been exceeded by the time you read this Wednesday morning it would imply that there is still plenty of buying power percolating beneath the surface - enough, presumably, to hint of a test of resistance at 80, a key psychological barrier.

I had planned to offer this one as a Pick of the Day until I realized the pattern had already played out to within 0.02 points of its 'D' target. I've reproduced the chart anyway because the opportunity was so fetching -- just subtle enough to evade detection by "Gartley 1-2-3" traders, but still well within our rules. The red bars were notched during off-hours trading, and although it would not have changed our ABC calculations if they had been omitted, they should always be included for vehicles that trade round-the-clock.

'What Will Save America?' We raised the question a while back, inviting readers to submit short essays on the topic. More than 50 of you responded, some with the kind of ideas that are all but certain to percolate into the presidential campaign as it heads down the home stretch. There can be little doubt the recession will grow more severe between now and November, even if it has yet to be officially acknowledged. Although the absence of statistical recession has taken pressure off McCain and Obama to address the economic crisis in a meaningful way, there is no way the next President will be able to fudge dealing with it from Day One. We cannot predict what either candidate is likely to attempt in order to resuscitate an economy sinking into depression, but our essayists overwhelmingly favored one measure above all: do away with the Federal Reserve. While we, and doubtless many others, endorse this idea wholeheartedly, we doubt that the powers that be could get seriously behind it. But who knows? Dumping the Fed would probably be the very first priority of President Ron Paul. However, we shudder to imagine how dire our situation would need to become before such a man became electable. In the meantime, there are other things that can, and will, be tried. They will have to be, otherwise America could spend a generation or longer wallowing in poverty. Asian nations will be the first to emerge from the coming global depression, and we will have to beat them at manufacturing in order to re-grow our wealth the old-fashioned way. And make no mistake, there will be no other way to do it. The world will have no need for 'financial superpowers' who excel mainly at leveraging credit, as the U.S. has long done.

The futures telegraphed weakness last week when they failed on Thursday to reach a relatively easy target at 851.80. (The actual high was 849.70.) Now, shortly before 5 a.m. Tuesday they appeared southbound for a minimum 803.60, or 799.30 if any lower. That second number, a Hidden Pivot support, would be the more conservative spot to try bottom-fishing, since a stop-loss as tight as 0.40 points could be used. Please note, however, that the low so far tonight has been 805.10, and that the targets given above would be negated if the futures top, respectively, 811.00, or 813.00. _______ UPDATE: The 799.30 support failed, suggesting that still more weakness lies ahead. For the moment, though, Gold has rallied about $17 off a $795.20 low. Today's effort would need to go another $9, though, topping 822.40, to put bulls back in command.

Gustav didn't pack quite the destructive punch that had been expected, and so crude has collapsed early Tuesday morning. The so-far low has been 105.48, not far from a Hidden Pivot at 105.18 that I've extrapolated from the hourly chart (where A=117.22, September 1). Any lower would indicate 103.64, but I am not recommending any shorts other than via real-time signals, since bulls who confidently initiated the hurricane trade on Friday have probably been punished enough.