December 2008

A Hidden Pivot resistance at 12.658 is equivalent to the bullish target given for February Gold. Minimum upside for the next day or so would be to 11.345, its sibling midpoint. As always, an easy move through either of those numbers would suggest that still higher prices are imminent.

The futures have been struggling too hard to pull back to an 852.75 midpoint suopport flagged here earlier, so we should look for them to move higher this week. Even so, you could bottom-fish at 852.75 with a stop-loss as tight as 1.00 point; or at 827.25 if the selling further intensifies to an unexpected degree. _______ UPDATE: Cancel any bids at 852.75, since we've already seen a so-far 11-point bounce from 853.25. I'm tempted to infer that my targets for this vehicle are getting front-run. A possible solution would be to publish the actual targets in the chat room just before they are hit. That would keep them from circulating much beyond Rick's Picks' subscribers. Please note that the 827.25 target would become an odds-on bet if the 852.75 pivot is decisively breached, or the futures close below it.

I assiduously avoid market-on-open orders, since they leave the retail customer vulnerable when predators are most easily able to manipulate option prices. However, we should try to buy some March 45 calls (NEMCI) in the 2.60-2.80 range today, provided the underlying stock does not fall below 39.00 (in which case we would bring our bid down commensurately). From a Hidden Pivot perspective, it looks like clear sailing to at least 43.50, a midpoint resistance derived from the daily chart. _______ UPDATE: Newmont was very strong, and so the calls traded no lower than 3.05. Stay tuned as we look for weakness, since the stock is on our short list of buys.

Jim Willy is one of the few commentators on the economic scene who deserves our serious attention. In his latest report, he trashes the crackpot notion that we’re in a mere recession, or that a recovery will occur in 2009. The economic paradigm is shifting tectonically, he says, and few things will be the same once we emerge from the current crisis. He also has this to say: “The year 2009 by year-end should be marred by very big inflation outbursts in price structures, enough to silence the wrong-footed deflation theory guys.” Since I consider myself a deflation-theory guy, though certainly not a wrong-footed one, I will have something to say about this in Rick’ Picks commentary due out later this weekend. Let me mention that I have been shouting deflationist warnings from the rooftops since the early 1990s. I first wrote on the topic for Barron’s in the early 1990s, focusing on the key role of money velocity, and returned to it often in the column I freelanced to the Sunday San Francisco Examiner during the years of the dot-com boom. A Lunatic Alone For most of the 1990s, as far as I am aware, I was the only person writing in mainstream publications about deflation. It felt as though I had that piece of the lunatic fringe all to myself. Economist Ashby Bladen used the word “deflation” a couple of times in the column he wrote for Forbes, and an agricultural forecaster named Bill Helming wrote about the threat of deflation as it pertained to the farm economy. But it wasn’t until a few years after the collapse of the Thai baht in 1997 that a couple of others began to address a global, deflationary threat. The word “deflation” itself did not appear in a New York Times

The newspaper headlines have been saying this was the slowest Christmas shopping season in recent memory, and so I was unprepared for the mayhem that greeted me at the local mall Tuesday afternoon. I waited until the last minute this year to do my shopping, since I not only had to take care of holiday gifts for Christmas and Chanukah, but also birthday presents for my wife, who was born on December 28. The parking lot was so full that it took me ten minutes to find a space, and the stores were busier than I’ve ever seen them, even at the height of last year’s holiday season. The crowds were thickest in the Apple store, which was so densely packed - mostly with shoppers who looked like they were in their early twenties - that it was hard to move around. Checkout lines moved quickly, though, since many of the salespeople were equipped with Bluetooth scanners to handle customers paying with credit cards. I was amazed at how many different items the store sells besides computers, iPods and iPhones. I purchased a microphone for my son the guitar player, and a knapsack for my other son. Brookstone's was nearly as crowded -- in part, no doubt, because one of its biggest competitors, Sharper Image, went bankrupt earlier this year. I wish I could report that Nordstrom’s was doing brisk business as well, because it is a company that has always gone to great lengths to please its customers the old-fashioned way -- with great service and quality merchandise. There were some shoppers in the store, but no more than you might have expected to find on a moderately busy weekday outside of the holiday season. A Holiday Message I’ll be taking a few days off, so there will be

At day's end, the futures looked poised for a 30-point drop to a Hidden Pivot support at 827.25. They've yet to reach its sibling midpoint at 852.75, but if that number gets busted, the move down to 827.25 would become an odds-on bet. Night owls -- including a growing contingent of traders from Oz -- can try bottom-fishing at 852.75 with a stop-loss four ticks below. _______ UPDATE: The futures went no lower than 856.00, so we did nothing.

The futures face jeopardy over the near term to as low as 804.40. That's a Hidden Pivot, and it was derived from a pattern that looks authoritative because of the way the A-B impulse leg was formed. Notice in the accompanying chart how point 'B' exceeded the very subtle but key low recorded three days earlier. The overshoot was by just a single tick, but that's enough to suggest that the downtrend is likely to produce a follow-through C-D leg. There are two ways the bear could be waylaid, however: 1) by a rally from the 828.70 midpoint that exceeds 854.50; or 2) by a rally from no lower than 828.80 that surpasses 861.50.

The March Bond futures look like they may have one last thrust left in them, presumably to Hidden Pivot target above 144. A corresponding move in this vehicle -- an "ulta-short" ETF -- could be expected to bottom at 33.27. It's impossible to predict how much the January 34 calls (TBTAH) will be selling for at that time, but we should be ready to buy them in any event, since that would effectively allow us to stake out a short position in the bonds. To determine a fair price for the calls, I'll suggest using whatever bid is reflected by the market makers if and when TBT comes down to within 0.10 points of our 33.27 target. If you want to be alerted in real time when this opportunity materializes, keep your bulletin launcher switched on, since I plan to provide timely guidance intraday.

Stocks are supposed to waft effortlessly higher the last week of the year, but the buying power just doesn’t seem to be there. So much for desperation’s final fling, a hallowed tradition of Wall Street money managers hell-bent on padding their Christmas bonuses. We still expect a flurry of criminally brazen mark-ups before New Year’s Eve, but it looks as though DaBoyz might be saving what precious little ammo they have until the final session hours of 2008. We glimpsed pale evidence of underlying weakness yesterday bottom-fishing in the E-Mini S&Ps and the QQQs. A recommendation to buy call options in the latter went out Sunday night, pegged to a mildly bearish target about one percent below Friday’s close. We lowered the target via a bulletin Monday, and bought a January 29 call just as the underlying stock was bottoming at our target, 29.13. Ordinarily we would have expected the bounce to last for at least 3-4 hours, since it had taken the QQQs four days to reach the target. But we had to settle for a feeble rally that survived barely 90 minutes, and a profit on the option that would not have covered the tip for two at I-Hop. The Cubes subsequently exceeded our downside target by 39 cents, and although DaBoyz managed to trigger off a short squeeze from those depths, it was barely strong enough to torment bears, never mind strike fear into their hearts. As much could be said of the E-Mini S&Ps, which bounced tradably and precisely from Hidden Pivot supports, but not robustly enough to give buyers even an hour of pleasure. Incidentally, we held an impromptu webinar yesterday morning to watch and trade the market as it cavorted intraday. We’ll probably do it again this morning, so if you get bored and