November 2008

The futures were easing lower Sunday night, but in that conspiratorially humdrum way that tells us not only that DaBoyz are not nervous, but that they are intent on accumulating shares for a squeeze play overnight or on the opening. However this carny game plays out, we'd be buyers at only one price, 766.50. That's the 'D' target of the pattern shown, and about as promising a Hidden Pivot as a trader could ask for if it completes by Wednesday or Thursday. More immediately, action at the 887.50 midpoint looks distributive, suggesting that a short-squeeze tonight or Monday morning is to be faded rather than feared. Whatever happens, we'll use 766.50 as a minimum downside target for the time being.

The rally promises to push DXY to at least 89.22, provided 86.13 is not breached to the downside first. The stall near the 87.68 midpoint was not unexpected, but that number will have to be exceeded by at least 0.20 points intraday to signal DXY's readiness to take flight.

Returning to our desk yesterday after a luncheon meeting in Denver, we dropped in on the Rick’s Picks chat room after-hours to find out what had caused the Dow to trampoline more than 900 points from its intraday low. Alas, the chat room denizens seemed as clueless as we were. We guess it was just one of those things. Not that anyone should have been surprised. Mr. Market has a well-known penchant for making certain that bears do get rich the easy way, betting on so sure a thing as that stock prices will go down, down, down ahead of an unprecedented collapse in U.S. corporate earnings. Lately, the surest thing we could foresee was that the shares of Citigroup, trading above $12 as recently as Monday, were bound lower, to at least $7.75. Accordingly, we put out the following recommendation to subscribers Wednesday night, with the stock trading around 9.64: “Citi is all but guaranteed to hit 7.75 (or 7.09 if any lower), and soon, but as we have learned over and over again in this stock, that doesn't necessarily mean we can make money shorting it. I have no specific strategy to suggest for the opening, since opening-rotation prices rarely favor the retail customer. However, if Citi begins the day with a moderate rally, you might want to have a stink bid in for some December 12.50 puts (CXZ).” As if on cue, Citi gapped 25 cents higher on the opening, presumably on a small excess of buy orders over sell orders. We can only hope that alert subscribers were able to pick a few December 12.50 puts at the bell, since they shot up by 46% before collapsing again as Citi reversed direction and rallied 15% to finish the day at 9.54. We see Citi and the

Yesterday's nearly 100-point rally qualifies as noise, at least so far, because it did not surpass two external peaks of hourly degree (see chart). That could change overnight or Friday morning, but until it happens we needn't act impressed. Looking at a bigger picture, the rally would have to hit 1068 to invalidate the 612.75 target broached here yesterday. _______ UPDATE: During an impromptu webinar Friday afternoon, we got to see the hysterical rally fail in real-time when the S&Ps reversed within 1.50 points of a key midpoint pivot at 916.50. The short-squeeze would likely have continued for at least another 48.50 points if the pivot hadn't but the kibosh on it. However, the subsequent reversal was so nasty that it invalidated the target, 965.00.

To suggest more strength is coming, the rally off yesterday's v-shaped bottom would need to surpass 9.595 today without first pulling back below 9.190. Alternatively, if weakness resumes, a test of the key low at 8.400 recorded on October 28 would appear likely.

Unlike Comex Silver, December Gold appears to have clinched a bullish follow-through to yesterday's high-spirited rally. It would be confirmed today by a booster-stage thrust of at least 10.30 points starting from within the range 713.70-722.00.

The dollar got hit pretty hard yesterday -- for reasons unknown -- but it caused only minor technical damage to the intraday charts (see inset). We cannot yet say whether the selling is likely to continue, or perhaps accelerate, but if the pullback traces out a pattern like the one in the chart, it may provide us with a way to accurately assess whether a the bull run is over. Specifically, as a sign that the bullish intermediate trend is still intact, we'll be looking for an abc down-pattern to reverse around the midpoint of its c-d leg.

To suggest more strength is coming, the rally off yesterday's v-shaped bottom would need to surpass 9.595 today without first pulling back below 9.190. Alternatively, if weakness resumes, a test of the key low at 8.400 recorded on October 28 would appear likely. _______ UPDATE: Silver did what we asked of it Friday, earning the bullish benefit of the doubt for the near term. Our doubts about the longer-term would be assuaged by a print at 11.200, provided the rally to that number had been unpaused on the daily chart after exceeding 9.855.

At the rate Goldman Sachs shares have been falling lately, they could reach our $29 “hula target” by Thanksgiving. Barely a week ago, we predicted a plunge to $29 when GS was trading above $90; yesterday the stock hit $64. At the time, we vowed that if the forecast did not pan out, we’d don a grass skirt and dance the hula in Times Square in the middle of Feburary. So far, and unfortunately for Goldman’s shareholders and partners, we haven’t had much cause for worry. The $29 projection was purely technical, based on Hidden Pivot analysis. But you don’t have to be a chartist to see that Goldman’s survival issues will only grow more challenging. If you merely ponder what the firm was doing to make profits by the tankerful a year ago, you’d have to wonder how they will make their money now; for the firm was operating at the very center of a smoke-and-mirrors business that no longer exists. We don’t doubt Goldman can survive and make a profit. However, in the deleveraged financial environment that now exists, and which will probably continue to exist for at least a generation, we’d be surprised if they can make even a hundredth of what they made in their halycon days as a global wheeler-dealer. Meanwhile, there can be little doubt that Paulson’s latest ditherings contributed to the whack that financial stocks took yesterday. We should come right out and say it, since the mainstream media probably will not: Paulson, Bernanke and Friends have lost control. Yes, they have. As much should have been obvious to anyone tuned to Paulson’s speech yesterday. Turns out he’s no longer keen on buying up bad mortgages; instead, he now wants to pump credit money into the consumer economy. Just what we need: more