October 2008

The sharp rally off Friday's lows will qualify as just another garden-variety fake unless the Cubes can get past 31.09 today or tomorrow. However, if they continue on their inexorable dirge lower, a Hidden Pivot at 26.75 could provide us with an appealing opportunity to attempt bottom-fishing. For the time being, that number can serve a a minimum downside objective. Here's another that I think will be hit in time -- perhaps sooner than some might imagine: 21.70. Keep it in the back of your mind, since it may prove useful. _______ UPDATE: The failure of today's superficially impressive rally to surpass 31.09 (the actual high was 30.20) kept us from being fooled by it. On the hourly chart, the short-squeeze never surpassed even a single prior peak before the buying collapsed, as we'd expected it would.

I've projected upside over the intermediate term to at least 92 because that's where visually obvious resistance would seem to demand a test. But using Hidden Pivots, it's possible to project the shorter-term with greater precision. Specifically, a close above a midpoint resistance at 86.79 would telegraph more strength to at least 87.92. _______ UPDATE: DXY got short-squeezed overnight, apexing so far at 87.86 before retreating with the tide. That is just 0.06 points from the 87.92 target given above -- close enough that we should consider it fulfilled. After a seemly consolidation in this vehicle, we'll be looking for the little monster to continue on its way to visually obvious resistance near 92.

If Kirk Kerkorian’s financial empire is crumbling, can Donald Trump’s even shakier financial empire be far behind? They’ve both gotten filthy rich by leveraging themselves to the eyeballs, so it stands to reason that both would be on the ropes with asset values now collapsing across-the-board. Kerkorian’s mounting problems were reported yesterday on the front page of the Wall Street Journal. He recently bailed out of 7.3 million shares of Ford Motor Co, losing a reported $640 million on an original investment of $980 million. To make matters worse, Kerkorian had pledged two-thirds of his 150 million shares in MGM Mirage to secure credit for his stake in Ford. MGM stock, which Rick’s Picks recommended as a short sale in the mid-$80s, has since fallen below $10, reducing the value of Kerkorian’s holdings to less than $2 billion from a peak of around $13 billion. We don’t know how Trump has so far managed to avoid the bad publicity that has begun to dog Kerkorian and a few other beleaguered member’s of the Billionaire Boy’s Club. Perhaps The Donald has better media connections? In any case, we expect Trump’s inevitable devastation to be worse than Kerkorian’s once the dust has settled. We estimate that Kerkorian is at least three-and-a-half times as smart as Trump, who has made far more money with his world-class mouth than with his presumably average brain. And while Kerkorian’s holdings are broadly diversified, Trump has put nearly all of his eggs in the real estate basket. We should also note that while Kerkorian has been an extremely successful casino operator for many decades, the Donald, a relative newcomer to the game, actually managed to bankrupt an Atlantic City casino when business in that town was still pretty good. A World-Class Mouth Concerning Trump’s real estate holdings,

Those ugly targets way down below are still valid, but it looks like the Indoos want to vamp for a few more days, bobbing and weaving like a punch-drunk fighter, until shorts have been wrung lifeless. We'd start to take the rally seriously, however, if DJIA closes for two consecutive days above 9105. That's a Hidden Pivot midpoint from the hourly chart, and I have reproduced it alongside for your interest. _______ UPDATE: Stocks have gotten savaged overnight -- a little healthy profit-taking, as Kudlow might say -- and it looks like the Plunge Protection Team, unable to work its magic, has deferred to circuit-breaker limits to do their work. In this vehicle, the midpoint pivot associated with the uglies down at 6195 is 7995, so we'll make that latter number our minimum downside objective for today.

Yesterday's $40 bounce may have felt powerful in real time, but it did not surpass even a single prior peak on the hourly chart, and so it is suspect. It wouldn't take much today to remedy that, since a $7 thrust from current levels, to 735.30, would surpass two "priors," signaling a tone change of at least minor importance. Much more encouraging still would be a surge that gets past a peak-let at 761.50 made on the way down Wednesday. Pivot analysis suggests the futures could get to 741.20, or perhaps 748.50 if any higher.

Bulls may have pumped another 170 points of hot air into the Dow yesterday, but they failed miserably where it counts -- in Citi, a stock that I characterized here the other days as THE bellwether to watch. The stock fell 32 cents while the broad averages climbed and now looks ready to re-test an 11-year low at 12.00. The spinmeisters have managed to keep this bank out of the news for the last couple of weeks, but only someone with the acument of Kudlow could believe Citi's problems are other than fatal, or that they will not eventually precipitate out in disaster.

Silver showed some resilience for a change yesterday, but I'd need to see a 10.325 print today before I could sound the "all-clear" for the near term. The significance of that number is shown on the hourly chart reproduced alongside. A rally exceeding 10.320 would create a promising impulse leg of hourly-chat degree.

Kerkorian holds a 54% stake in MGM Mirage, which as of yesterday had fallen 90% since peaking at $106 almost exactly a year ago. It is not possible to project a low using the long-term charts because the stock has exhausted all possible downside targets. However, a charitable reading of the daily bars suggests Kerkorian, as well as his deep-pocketed backers in Kuwait, may get relief down around 7.20, a midpoint pivot that we ourselves could try to bottom-fish if and when the opportunity arises. _______ UPDATE: The futures have taken an oversold leap from 8.91, so we'll shelve the order for now.

There’s real danger lurking in the markets, so we won’t beat around the bush. First off, the Dow Industrials look like they’re headed down to at least 6195. If so, that would represent a further drop of 27% from yesterday’s settlement price of 8519. Measured from the all-time high at 14198 recorded almost exactly a year ago, the decline would equal 56%. And if the Indoos were to retrace a Fibonacci-esque 0.618 from the highs, it would imply a bear market low at 5424. This hardly seems unlikely, given the incipient economic disaster taking shape in the U.S. What we fear most, however, is that the collapse of stocks will occur much more quickly than any of us are prepared for �' than any of us could have imagined just a few short weeks ago. (Click on chart to enlarge) Even the gloomiest permabears tend to think of a market bottom as an eventuality that lies years down the road. But the way stocks have moving lately, the bear market could be mostly over in a matter of weeks. At 5424, the Dow would have fallen by more than two-thirds toward the zero axis. However, it could subsequently grind 3000-4000 points lower over the next seven or so years, when the Kondratiev deflationary winter is scheduled to bottom. There’s also the possibility that the Dow will collapse to 5424 and then grind sideways for an eternity. That would be the most optimistic scenario we could envision. When to Back Up the Truck The news is not so good for investors in gold shares, either, since it looks like the Gold Miners Index (GDX) will need to fall all the way to 14.24 to put in a durable low. Currently trading at 18.49, this popular ETF has already lost two-thirds of