November 2008

The next air pocket in Citi should bring it down to 7.75, an outcome that suggests something financially frightening going on in the real world. The midpoint associated with that number is 13.50, and it is near that price where we should look to get short if Citi accommodates for once with an especially lively dead-cat bounce.

In Sunday night trading, the futures have suspiciously failed by a hair to surpass Thursday's mildly daunting peak at 958.00. However, if that changes before sunrise, it would give DaBoyz ammo to short-squeeze the opening. Hidden Pivots would become less significant at that point than the magnetic pull of the 1000 threshold that should kick in above 980. If 958.00 has not been exceeded by the opening bell, though, regard any rally from the overnight low with skepticism. _______ UPDATE: The futures have given up most of their spurious overnight gains, breaching minor pivots on the way down. At 10:12 a.m., with ES trading 942.75, the nearest downside target is 935.75, a Hidden Pivot that can be bottom-fished with a very tight stop-loss. It will remain viable as long as 949.25 is not exceeded to the upside first.

The highest short-term target I can project using the lesser charts is 90.83 -- enough to create a bullish impulse leg that would make a shallow pullback from that price a "buy". I cannot anticipate how a trade might set up, but I am mentioning it for the guidance of chat-roomers who will be tracking DIA in real time after the opening bell. The chart shows how, from a Hidden Pivot perspective, an opportunity could develop. _______ UPDATE: DaBoyz short-squeezed the opening to 91.75, and this will generate some synthetic buying power for the next couple of hours. However, I seriously doubt that the minor-trend follow-through rally will reach its 'D' target, since this morning's action has the smell of desperation about it.

Beginning next Saturday, Rick’s Picks will answer questions from readers in a weekend edition. (If you’d like to have Rick’s commentary delivered free to your e-mail box each day, click here.) Meanwhile, the letter below, from a long-time subscriber, is filled with interesting and provocative observations that I’d like to share with you. He writes as follows. Hello Rick. Great comments. I like to think of Bob Prechter's DJIA target of 400 more in terms of DJIA/Gold. If gold is $5000/oz, then the Dow will bottom at 5000; if gold is $400/oz, then the Dow will be 400, and thus the infinite range of potential bottoms in- between. Trying to pick any one number will make you go insane, like predicting the weather, and it will get your mental focus tied to a target that may be moving daily. Not healthy. GOLD & SILVER: Our charts are showing patterns that are historically reliable, putting silver at $3 /oz, gold at $450/oz and the HMU (Canadian mining EFT) at 1.50. HMU was $35 six months ago, and if this latest bottom is a wave 3 terminal sequence and wave 5 is extended like it often is in commodity prices/equities, it is possible that there is a 68% loss ahead for people going long today at 4.78. For instance, according to our Elliott Wave analysis, the bottoming number for that great silver miner, Pan American Silver (PAAS, currently trading for US $12.54 US) is 0.90. You may laugh at that number, but most of the Eldorado and Bema Gold share I bought in 2002 were at prices between 0.65 to 90 cents in 2002, and they were $10 stocks in the mid 90s. It has been very advantageous to be a former miner, then geotechnical engineer, and finally petroleum engineer who has

For day traders, leveraging the stock market’s breathtaking volatility of late has probably seemed like skiing the steeps at Crested Butte: one mistake and you’re dead, or wishing you were dead. Who could have predicted the Dow Industrials would one day gyrate so wildly that even 2,000-point swings would not be technically significant? You can see why in the chart below. From a Hidden Pivot perspective, the Indoos would have to rally above peak #1, or fall beneath low #2, to suggest that something serious is happening. Anything less, including the back-to-back 500-point declines we have just witnessed, is just noise. (Click on chart to enlarge) Investors can only pray that a whole slew of thousand-point selloffs don’t bunch up in the same quarter, since at that rate it would take just two months to bring the Dow down to Bob Prechter’s famous bear market target at 400. We think Prechter will eventually be right, but it could take years if the stock market’s rabid ups and downs continue to more or less cancel each other out. To be sure, bulls have been getting the worst of it for a year. But they should consider themselves blessed over the last month or so, since the broad averages have been marking time even as the economy slipped deeper into an abyss that in some ways is worse than the Great Depression. The Pinnacle of Affluence But worse for denial? It’s hard to know, since the evidence suggests that even in 1932, many Americans didn’t realize they were living through times so tough that they would come to be known as the Great Depression. The Okies knew, though, and so did those who lined up for soup. But this time around, the economy may have to fall quite a bit farther before

We hold four December 36 calls (QQQLJ) for 0.75, having been unable to short November 36 calls against them at anything remotely approaching fat price. Let's shoot instead for a lean price that would be realistic in the event of a moderate short squeeze: Offer four November 36 calls (QQQKJ) short for 0.20, day order. If we succeed, we'll have legged into a bullish calendar spread with little risk in either direction.

Yesterday's sharp break put December Silver on course for a decline to 9.750, but if that midpoint pivot is swept aside, look for the selling to continue down to as low as 9.305 over the near term. Alternatively, the first glimmer of hope would come on a print at 10.145, a tick above an "internal" peak visible on the 5-minute chart. _______ UPDATE (8:12 a.m. EST): After a night of gratuitous jacking around, there was immediate jeopardy to as low as 9.345. The midpoint sibling of this pivot is 9.820, and if it is decisively breached, the lower number would become an odds-on bet. These targets will remain viable as long as 10.295 is not exceeded to the upside.

The nasty dive into yesterday's close projects to at least 721.00, but if the futures slip beneath that Hidden Pivot support, we could expect them to continue down to at least 704.10. The target can be bottom-fished with a stop-loss of less than $1, but it will be less risky to attempt it if 704.10 is hit overnight. _______ UPDATE (8:25 a.m. EST): Gold has turned higher without having reached the 721.00 downside target identified above. This would ordinarily be a bullish sign, except that in this case the reversal has not created an impulse leg on the hourly. Also, the "premature" bounce may have been due, not to Hidden Pivots, but to the visually obvious support of lows near $722 recorded earlier in the week. While the futures show little inclination to fall to new lows (i.e., 704.10), neither do they seem eager to complete rallies to their 'D' targets. This appears to be true in all time frames, down to the little stuff.

Investors greeted Obama’s victory with a thunderous Bronx cheer yesterday, sending the Dow Industrials plummeting nearly 500 points in heavy trading. In ordinary times, we might have inferred that Wall Street denizens were registering their fear of what the most politically liberal President in U.S. history might attempt over the next four years. (Note to GOPers: Try stopping him with this line: “Obama! Klaatu barada nikto.”) But these are not ordinary times, and so perhaps there is another reason why shares plunged on a day when a majority of voters in this country were literally dancing in the streets over the prospect of “Change.” Our guess is that, with the never-ending campaign-from-hell finally over, it has suddenly dawned on investors not only that our dire economic problems are still very much with us, but that they are about to re-emerge with a vengeance as front-page news. (Click on image to enlarge) It will of course console no one that whatever occurs between now and Inauguration Day will be dealt with in some fashion by the Bush administration For all intents and purposes, Paulson, Bernanke et al. are Obama’s team as well, and if another big bank or two goes down between now and January, it will have made no difference who was President at the time. Again, in ordinary times, Obama and his economic advisors might want to have the worst of it over with before he takes office. But to the extent this could imply the demise of, say, Citicorp, so powerful an emetic in Q4 could just as easily kill the patient as purge him of sickness. (If you’d like to have Rick’s commentary delivered free to your e-mail box each day, click here.) Berkeley’s Best & Brightest Still, we are heartened to note that not all of Obama’s