November 2008

Here’s a BBC headline that gets it right for a change: “No Apathy as US Election Day Looms.” For sure. In our Colorado neighborhood there were get-out-the-vote volunteers ringing the doorbell all day long. And the phone, too. Even her nibs-- Michelle Obama �' called at least four times to talk, evidently undaunted by the fact that we’d hung up on her a dozen times in just the last week or so. Colorado is considered a swing state, but if you tally up bumper stickers hereabouts, the Boulder/Denver area is not exactly McCain country. The wide-open parts of Colorado are another story, and once you’re in cattle-ranch territory you could probably drive 100 miles in any direction without bumping into a single person who’s voting for Obama. Neither are we, although we are more or less resigned to his victory. In the last couple of weeks, the news media seem to have dropped any pretense of covering the campaign, or at least McCain’s side of it, focusing almost entirely on Obama’s whistle-stop appearances and the throngs that have attended them. While Obama is not our choice, we can only wish him well, since he will face the most challenging times since FDR. Are they so very challenging that even Congress will recognize the need for bipartisanship? We can only hope so, since America could be eye-deep in muck for the next decade if we don’t all pull together. Obama, Graciously Observed If you’re looking for inspiration, search no further than Peggy Noonan’s latest contribution to the Wall Street Journal op-ed, “Obama and the Runaway Train”. Like us, Noonan is no Obama fan, but she has nonetheless come up with some good reasons to give him the benefit of the doubt. We leave you today with some gracious observations from her

We're looking to get short on a pop to 35.40, a promising Hidden Pivot resistance. If that number is achieved, buy four December 33 puts (QAVXG). You can pay the offer just this once, since option spreads in this vehicle tend to be pretty tight. As of today, the puts would be a good deal for around 1.50, so you can leave a limit order at that price with your broker. I'll adjust if it looks like put volatility is changing on the way up, so keep your bulletin launcher switched on if you'd like to stay apprised in real time.

A Hidden Pivot target up at 1046.25 looks like a lock-up if the futures can push aside its sibling midpoint, 982.50. So far, bulls have been repelled after a poke that hit 984.00, but the shallow, flag retracement since looks like a second thrust in the making. Night owls could get long with relatively little risk by buying a 972.75 print with a buy-stop limit. This would create an impulse leg on the 30-minute chart without tipping off momentum players. If the impulse move takes out peak #2 at 974.50 on the same thrust, let it go. _______ UPDATE: Buy-stopping 972.75 would have worked perfectly, producing an overnight gain of as much as $1100 per contract. After hitting 972.75 for the first time, the futures inched up to 973.75 before pulling back to recharge for a nearly uninterrupted, 22-point thrust to 995.75. The futures have pulled back again, but the 1046.25 target looks like it's in-the-bag.

The apex of yesterday's timid thrust missed our bullish trigger point by nearly $5, but it will allow us to lower the bar slightly today, to 742.60. Still less ambitious is a pattern projecting to 734.90, a Hidden Pivot that would become an odds-on bet if its sibling midpoint at 730.30 is exceeded by more than three ticks. The target will remain valid as long as 725.60 is not exceeded to the downside first. Looking at a much bigger picture, the most compelling item on the weekly chart is a 676.70 target that was narrowly missed on the last big selloff. If the futures were to return to it, breaking the old low at 681.00, it would be a great place to load up. _______ UPDATE: December Gold has had quite a move off an overnight low at 721.80, but without much significance on the hourly chart. The nearest Hidden Pivot target worth noting is 788.40, and it can be used for now as a minimum upside projection. The pullback in progress at the moment (12:17 p.m. EDT) from a so-far intraday high of 765.00 might be expected to come down to around 752.70, the midpoint pivot of the pattern yielding 788.40.

We'll try something different, bidding 4.17 for a single December 95 call (DAVLQ), day order. That would represent a 50% retracement of the option's price since it bottomed a couple of weeks ago at 2.35. I have reproduced a chart of the option's price action, which should exhibit ABC-wave behavior just like the underlying stock. _______ UPDATE: We'll have to find another way to board, since the Diamonds opened on a gap that left buyers choking on dust. Now they look almost certain to reach 100.55, since the gap demolished the sibling midpoint of that pivot, 94.59.

The New York Times led its front page on Saturday with an article about, of all things, deflation: Fear of Deflation Lurks as Global Demand Drops read the headline. Better late than never, we suppose. For years, Rick’s Picks has been shouting from the rooftops that a catastrophic debt deflation was not merely possible, but inevitable. At times, we even characterized inflationists and those who asserted in print that deflation was unlikely or impossible, as contemptible idiots. Ad hominem attacks aside, we must warn you that these are not the guys you should trust right now, since they still don’t get it, not at all. They’ll catch on eventually, we’re sure �' after unemployment has pushed above 10 percent, recession has turned into depression, Greenspan’s key role in the destruction of the global financial system has been universally acknowledged, and the Dow Industrials have fallen below 4000. But for the time being, the retrograde theorists of inflation remain totally clueless about its opposite and how to deal with it. Doubtless, some have even been buying stocks in recent weeks, convinced that global asset deflation has run its course and that a resurgence of inflation is about to cause share prices to explode. (For the record, we believe deflation has barely begun and that the stock market will not hit bottom before 2015.) Buffett a Closet Bear? Still, we’d have to concede the numbskulls are in good company, what with Warren Buffett, Bill Gross and Jack Welch ostentatiously professing their bullishness to any reporter who asks. We’re pretty sure these guys are closet bears, and would hasten to add that, by taking a symbolic $5 billion stake in Goldman Sachs, Buffett was not exactly “buying America.” Let him suck up some GM shares if he’s so bullish. As for Gross, he

Comex Gold was creeping higher as trading began Sunday evening, but it'll need to hit 743.90 to warrant our rapt attention. Night owls looking for a very low-risk way to get long should consider buying if the futures trace out a pattern like the one shown in the chart. The key to the strategy is an A-B impulse leg that terminates between the two numbered peaks. That would give us a rules-based, "stealth breakout" that is not likely to have registered on the radar of conventional support-and-resistance traders. Alternatively, if gold continues lower, the first Hidden Pivot support we could use for a downside target lies at 712.90.

The December futures need only punch through, then close above, 10.265, a midpoint Hidden Pivot, to signal their readiness for flight to as high as 11.330 over the near term. Sunday night owls should look for support at 9.735, but I wouldn't lean to heavily on this minor pivot, since the pattern that produced it is a little fuzzy. Another way to get long would be to buy-stop 9.875, since a print at that price would be a minor, double break-out: above a previous peak, but also above a minor midpoint pivot. _______ UPDATE: Silver's rally fizzled a tick below the 10.265 trigger price, disappointing bulls but providing a timely and precise opportunity to hedge long-term positions.

I've identified a Hidden Pivot rally target at 1046.25 that should come easily once its midpoint sibling at 982.50 has been exceeded on a closing basis. However, there is also a lesser target at 1013.50 that we should consider if the futures work their way into the range between the two numbers. We'll make 1013.50 our minimum upside objective for now, since its respective midpoint, 964.00, looks like it's dancing with the E-mini this evening.