December 2008

Some of the most astute bears we know have turned bullish in recent weeks, none moreso than Porter Stansberry. Porter was a good six months ahead of the crowd when he read Fannie and Freddie their last rites early in 2008. Although we can’t recall the last time he waxed enthusiastic about stocks, he is doing so now: “The investments you make right now will become the best investment of your entire life,” he asserts in his latest advisory. He sees this as one of the great buying opportunities of the last 30 years. Bob Hoye is another seer of renown who thinks a turn is at hand, although not a full-blown bull market. In recent years he’s been a bear’s bear, and he’s gotten it right for as long as we can remember. He now thinks equities are building steam for a powerful rally that could carry into 2009: “A [bear rally] amounting to fifty percent of the loss from the May high seems possible,” writes Bob in the November 27 edition of Pivotal Events. That would imply 10,300 for the Dow and 1090 for the S&Ps. (They are currently trading, respectively, for around 8800 and 896). Another favorite of ours, Peter Eliades, sees a bullish correction that could last till April or May. Peter, whose Stockmarket Cycles was recently ranked by Hulbert’s as the top performing newsletter in the country for the first nine months of 2008, says that although the odds are small that the November 21 low will endure, conditions are improving for an intermediate-term rally. Powerful MACD And finally, there is our old friend and former PSE options-floor colleague Tom Tankka, a trader who has lived by his wits, and lived well, since we first met him nearly 30 years ago. An e-mail we received

The mini-indexes were headed unconvincingly lower Sunday night, presumably to be bought more advantageously by DaBoyz than at the tail end of last week's three-day spree. If the pullback continues, a midpoint pivot at 874.75 will make a logical minimum downside target. Alternatively, if last week's short-squeeze resumes, look for it to hit 920.25 by mid-session. _______ UPDATE: Retracement targets analogous to those given for the Mini-Dow lie, respectively, at 818.25 (50%) and 799.50 (61.8%).

A rally target equivalent to the one flagged in today's ES tout lies at 8945, but a two-day close above it would suggest more upside over the near term to at least 9401. Any weakness this morning could be expected to find support near 8599, a key midpoint pivot on the hourly chart. _______ UPDATE: The pundits would have us believe stocks are getting whacked this morning because of weak numbers out for U.S. manufacturing. However, if this "revelation" took traders by surprise, we'll eat a Chevy crankcase. The market is down simply because the short-squeeze that had pushed it higher ran out of fuel, and because the shakedown artists who more or less control the markets are intent on accumulating shares at lower prices. Now, if the futures retrace half of their gains since November 21, it would imply more downside to at least 8134, or 300 points lower. If the retracement hits 61.8%, the low would be around 7903.

OPEC is hoping to push crude back up to $75 by reducing supply, but there's little technical evidence that traders are taking the threat seriously. Notice in the accompanying chart how last Monday's seemingly impressive thrust failed to surpass the modest "look-to-the-left" peaks recorded a few days earlier. This suggests a lack of boldness on the part of buyers. Although they finally managed the feat on Friday via a second attempt, that clears a path over the near term to no higher than 57.11. However, nothing less than 61.01 will turn the hourly chart persuasively bullish.

Gold's seeming reluctance to take on a minor Hidden Pivot resistance at 822.10 is not encouraging. So that we can be more confident in any rally that develops this week, let's put aside pivot targets for the moment and judge solely on impulse-leg action. Specifically, we'll stipulate that the futures must touch 855.10, surpassing the two labeled peaks on the 240-minute chart, before we infer that bulls have once again taken charge.

A strong downdraft could yield a buying opportunity at 26.67, the midpoint support of the pattern show in the accompanying chart. I'll put out further details on-the-fly, so if you're interested keep your Bulletin Launcher switched on. We'll be looking to buy near-the-money December calls if they haven't picked up too much juice when (and if) the Cubes reach the target.