December 2008

If precious metals are about to take off in the way anticipated in the current touts for gold and silver, then the Dollar Index should register corresponding weakness by taking out the key low at 83.10 recorded on October 30. Such a move would have even more-bearish implications if it should also exceed the 80.75 low of 10/14 as well without an intervening a-b-c rally on the 60-minute chart.

A while back, when Microsoft shares were trading in the mid-$20s, we used charts to predict they would eventually fall to $4 or lower. How could such a thing happen to a company with a product that dominates the software world, and with cash reserves totaling more than $20 billion? For starters, consider that Microsoft used to have twice that sum on hand but squandered a big chunk of it on investments that would make the guys at Bear Stearns look like visionaries. Also, they have not exactly enticed new customers in droves with the clunky Vista operating system. While the Redmond behemoth may have been able to ram this product down the throats of captive business and institutional customers, much as they have been doing for years with each new, gratuitously enhanced version of Windows, individual buyers have deserted the platform en masse. Just look around you the next time you’re at Starbucks: probably half of the computers one sees these days outside of the office and commercial airliners are Macs. The percentage is even higher at college libraries. These are tomorrow’s business users, and most of them wouldn’t use a PC if it were given to them free. Meanwhile, Microsoft has promoted the lie that if buyers want new PCs with the old XP operating system, the only choices available are low-end machines. This is untrue, as I discovered a month ago, when I bought the computer I am working on at the moment, a Dell XPS that is one of the most powerful models in their line. Microsoft would have been pleased to drop support for the XP operating system a year ago, but it’s plain to see that boxmakers like Dell have simply not allowed it. Buggier than Ever Another reason Microsoft’s shares, currently trading for

The usual Friday burlesque has gotten off to an early start, with the mini-indexes in freefall Thursday night. There was a time when Wall Street might have celebrated the reluctance of Congress to throw so much more good many after bad. This time, however, it is bitter disappointment that we are meant to infer. But would it be so terrible if GM did not live to produce a subsidized $60,000 compact that runs 40 miles before needing a six-hour recharge? In any event, the S&Ps as of 11:30 p.m. EST had discounted a 400-point drop in the Dow on the opening. Seems a little overdone by DaBoyz, but presumably with the intention of exhausting sellers to set up a short squeeze. Night owls can try bottom-fishing at 821.75 with a stop-loss as tight as 820.75. The target comes off the 5-minute chart reproduced alongside. Please note, however, that there's an alternative target at 819.50 that would become my minimum downside objective if the stop is hit. Buying at the lower number would be the more conservative play, but that could cause you to miss a more promising bounce from the higher number. If both get obliterated, the next stop would be 806.75, a Hidden Pivot that could be bought with a stop-loss as tight as 1.00 point. _______ UPDATE: The futures went no lower than 829.00 overnight, when the apparent exhaustion of sellers cleared the way for a short-squeeze on Friday. Through it all, the grautitous ups and downs left intact a 969.25 rally target first identified here more than a week ago.

The futures still need to close above 808.70 for two consecutive days to earn our confidence. More immediately, they look bound on Thursday night for a Hidden Pivot support at 809.40, or at 807.00 if any lower. Nervous Nellies, please note: It would take an unmitigated collapse to 741.10 to negate the big-picture target at 876.20 given here earlier.

The futures were barely holding the 10.185 target of the pattern shown, but I spotted this pattern too late to suggest bottom-fishing there. The Hidden Pivot looked pretty shaky as of midnight EST, suggesting that Friday will bring more consolidation.

Our downside target at 83.95 was roundly thrashed yesterday, so here's a new one: 82.16. That is my minimum downside objective for the near term, subject to a possible delay at 83.02, its sibling midpoint. Alternatively, it would take a pop to 84.22 to turn the lesser charts bullish. Note: If neither of the downside targets shows much pluck, take it as a sign that the dollar is likely to remain week as next week begins.

The rally begun last Friday blew past no fewer than five peaks on the hourly chart without a pause, so I have my doubts that the shakeout in progress Thursday night would mutate into disaster. More likely, as noted in the ES tout, it's just a set-up for a short-squeeze. It might take yet another reversal on the auto bailout to bring that about, but stranger things have happened on Capitol Hill. Remember, these guys aren't keen on spending their weekends hard at work.

February Gold faltered near a crucial resistance yesterday, but initial signs suggest a bullish outcome. If so, the futures could soon be trading as high as $876, up nearly $70 over yesterday’s settlement price. The immediate impediment lies at 808.70, a Hidden Pivot that we projected as a minimum rally target a few days ago, when gold was trading around $764. Here is the actual tout that went out to subscribers last weekend, after electronic markets had sprung back to life: “With Sunday's night's modest show of strength, our focus shifts to the bullish pattern shown in the accompanying chart. It is straightforward in demanding that bulls prove their case with a strong close above 808.70, the Hidden Pivot midpoint. Once decisively past this resistance, February Gold would have what looks like an easy shot at 876.20. For now, though, we'll make 808.70 our minimum upside objective.” Yesterday, February Gold reached 808.70 exactly, with a $35 rally; the futures then languished for the next two hours, pulling back by $10. That could have been the end of it, and we’d have looked at the rally as another failed attempt by bulls to get something going. But they mustered second wind, pushing the February contract as high as 813.90, and that suggests there is yet more buying power percolating beneath the surface. We still want to see the futures close for two consecutive days above 808.70. And to further lessen the chance of being fooled, we’ll toss out yesterday’s settlement, since it occurred just a dime above the 808.70 benchmark. We’d also ratchet up our skepticism by a hair if Wednesday night’s weakness should exceed 802.30. That’s a Hidden Pivot correction target, and we look for it to support a tradable bounce if the larger uptrend is still viable. Whatever the

The 969.25 rally target is get a bit mouldy, but it will remain valid nonetheless unless 813.00 is exceeded to the downside. The midpoint resistance (now support) with which it is associated lies at 891.25, and so we shouldn't be surprised to see the futures pussyfoot near there in the hours (days? weeks?) ahead. The resistance should have been no more than a mild stumbling block, but the fact that it has put up a fight about to stretch into its fourth day is yet more evidence that there is insufficient buying power to short-squeeze stocks into a 3-5 week rally as some of my guru colleagues evidently expect.