October 2008

With a Hidden Pivot target at 121.62, AAPL has high-beta potential if the broad averages continue to rally. Let's try a small speculative play, bidding 0.68 for two November 120 calls (QAAKD). The bid is stingy and may need to be raised, but I'd rather start the day without getting sucker punched. Any adjustments will be published under Intraday Notes, so turn on your Bulletin Launcher if you want to be apprised. _______ UPDATE: Apple took off this morning without deferring to our niggardly bid, and the calls traded no lower than 0.82.

We assume that each hysterical rally is just another doomed short squeeze, since it’s hard to imagine anyone, even Larry Kudlow, buying stocks at these levels because they represent good value. Yesterday’s wilding spree racked up 630 Dow points by mid-morning, measured from the low recorded Sunday night by the electronic futures contract. Sounds pretty impressive, huh? But as we noted in a bulletin posted midway into yesterday’s session, the rally screamed “fraud” at the top, having failed to create a Hidden Pivot impulse leg on any charts above 15-minute degree. Incidentally, if you’ve never seen what the paid-subscriber page at Rick’s Picks looks like, updates and all, click here for a look at yesterday’s scandal sheet. We modify our targets on-the-fly, sometimes with input from the chat room, where technicians and traders from all over the world hang out more or less round-the-clock. Subscribe to our free, daily e-mail commentary by clicking here. (Click on chart to enlarge) Yesterday’s commentary explained why an abjectly worthless dollar has been rising steeply in comparison to every major currency except the even more steeply rising yen. The reason is simple enough: All who owe dollars are being forced to settle up in cash, since it’s gotten much harder to keep rolling the loans. The result is a global short-squeeze on the dollar, and although this should be obvious to anyone who understands how markets work, the concept is not exactly sound bite material for the evening news. However, we are encouraged to think the truth will out nonetheless, since the newsletter world is starting to pick up on it -- most recently, Clive Maund, who writes on gold, silver and oil shares; and Bill Buckler, editor of the Australia-based Privateer. The latter, now squarely in the deflationist camp, explains the dollar’s strength

Even though the futures closed beneath a hidden midpoint resistance at 741.70 yesterday, their initial move through it was so effortless as to suggest that buyers will be back today with gusto. If so, there's immediate upside potential to as high as 776.40, a Hidden Pivot. However, it would take a little bit more than that -- specifically, a print at 782.30 -- to rout sellers this week.

We set a bullish benchmark for December Silver at 10.325 last week, but the futures are not exactly rising to the challenge -- at least not so far. Even so, one could attempt to get long using a 9.550 buy-stop limit, since a print at that price would create a bullish impulse leg without exceeding a more obvious peak at 9.620 made on the way down last Friday. Alternatively, if the futures go into a dive, plan on bidding aggressively at 8.300, a Hidden Pivot support that looks good for a tradable bounce. _______ UPDATE: The futures, coy as ever, swooned to take their tradable bounce from 8.400, a dime above our bid. Cancel it for now.

I still like the Hidden Pivot down at 26.75 as a place to try bottom-fishing, but because it lies a potentially hellish 7% below these levels, I cannot offer it as a Pick of the Day, at least not yet. However, if the Cubes should close within 0.30 or so points of it, I'll provide detailed advice on how to get long with relatively little risk on an opportune swoon. I've included a chart that shows how the target was derived. A crucial factor in favor of this pattern is that point 'B' surpassed the prior low, 29.38. _______ UPDATE: Our bid languished, well below the insane heights achieved by the Cubes yesterday. Cancel the order.

November Crude's next dive looks it will find traction at 67.99, a Hidden Pivot midpoint. But if the futures should close beneath that number for two consecutive days, look out below, since it would indicate further slippage is likely to as low as 59.86.

Citi, our favorite stock in the Walking Dead category, has slipped beneath a decade low at $12 with nary a bounce. This suggests that the stock's beleaguered institutional sponsors may have opted to dig in their heels at a lower level. Even though they know nothing of Hidden Pivots, we're betting they will step in at exactly 10.16, our projected low for the near term. Accordingly, you should plan on buying December 10 calls (CLB) for about 1.64 if and when the stock gets there. I've included a snapshot of an option calculator that shows how I arrived at a fair price for the calls. The 100 volatility I've plugged in is a little lower than current implieds as indicated by TradeStation. _______ UPDATE: Citi rallied sharply off an 11.54 low, mooting out bid, which should now be canceled.

The absurd spectacle of a short-squeeze driving a worthless dollar sharply higher is bound to make life difficult for gold bugs in the weeks and months ahead. If you are among those wondering what to do, you need first to understand that the dollar’s surreal strength is not a flight to quality, as nearly all observers still seem to believe; rather, it is due to the fact that those who owe dollars are unable to roll their loans and must settle up immediately in cash. We predicted this scenario years ago and reprinted the essay recently in our daily commentary. (Click here to receive this commentary free each day by e-mail.) One reason the mainstream media have failed to grasp the true reason behind the dollar’s steep rise is that mainstream thinking is congenitally incapable of grasping the bluntly obvious fact that the dollar is fundamentally worthless. The Wall Street Journal’s Peter McKay, for one, noted in a recent front page article that investors typically migrate toward the dollar in times of stress. But to think such a thing of Arab, European and Chinese investors is simply condescending, since they know as well as you and I that the trillions of dollars worth of bailout and backstopping commitments the U.S. Government has made in recent months can never be redeemed in fully valued dollars. Since this makes the dollar’s collapse inevitable, foreigners would have to be very stupid indeed to be buying dollars by the truckload now for reasons of “safety,” as the pundits and commentators would have us infer. Challenging for Gold Bugs For those who have been hoarding physical gold in order to tide themselves over in the hardest of times, the implications are challenging, to put it mildly. We delved into this a couple of weeks ago

Gold has taken a sharp bounce from just above a Hidden Pivot support at 676 that was broached in the chat room on Friday. The fact that the low did not attain the pivot, and that the subsequent rally has created a bullish impulse leg on the hourly chart, is encouraging, since it hints that we may be witnessing the start of a rally more enduring than others that have occurred in a long while. If so, any rallies that occur over the next few days should create bullish impulse legs of minor degree, at least. Keep in mind, however, that the futures would need to hit 859.20 this week to turn the daily chart decisively bullish.