January 2009

The "Don't Pass" line looks like an enticing bet here, since Best Buy has doubled in price since bottoming at 16.42 in November. However, the minor-cycle uptrend looks like it still has a little ways to go, to a Hidden Pivot target at 30.75. If and when that number is closely approached, buy two February 30 puts (BBYNF). They should be trading for around 1.30 if the target is hit this week, but I'll post further guidance if it looks like an adjustment is needed. To be apprised in real time, keep your bulletin launcher switched on. I've included a snapshot of my option calculator that shows how I arrived at a price for the puts. The 55 volatility comes from TradeStation's option analysis page.

The bullish outlook hasn't changed since I posted targets at 843.25 and 862.50 in the chat room Monday morning. The futures were selling off hard at the time, but this maudlin note of despondence occurred after the March contract had already pushed past four prior peaks on the hourly chart, guaranteeing lots more upside unless Armageddon interceded. Many hours later, at 2:15 a.m., the original targets were still valid, and the higher of the two would still be short-able, stop 863.25. The first is a midpoint resistance, and if it is exceeded by just a little -- say, by a print at 845.00 -- I'd infer the push to 862.50 is under way. _______ UPDATE: The futures screwed the pooch from bell to bell, but the 862.50 target is still valid.

With big new layoffs announced yesterday by Texas Instruments, Caterpillar, IBM and Sprint, investors chose to see the bright side, focusing on a dead-cat bounce in the housing sector to pump up stocks for a few hours. An uptick in both home sales and the index of leading indicators was treated as statistical surprises, allowing floor trader Anthony Conroy his 15 minutes of fame with this sunny quote, reported in the Wall Street Journal: “People are beginning to realize that the stuff we're seeing from the fourth quarter is in the past, perhaps from the worst quarter we're going to see for the entire recession." You’d think a floor trader would have better sense than to join the chorus of PhDs who profess to see a recovery later in the year. Spouting such poppycock may be the ticket to mainstream respectability and recognition, but remind us to pillory these guys if, come June, things haven’t started to improve. We’re not sure which “people” it is who have begun to “realize” that the worst of the recession is over. But it surely is not the ones who have been weighing in at the Rick’s Picks forum. There, the discussion has taken a survivalist tack, mostly in response to an Inflation vs. Deflation thread that has produced some illuminating discussion. An excerpt that I printed out for my wife listed 100 items most likely to disappear from store shelves when the panic begins. This is not something you’ll want to ponder after the panic has begun. Indeed, if you wait until the story finds its way onto CNBC, fried pork rinds may be all that is left at suburban Safeways. Click the link above and check it out! (If you’d like to have Rick’s Picks commentary delivered free each day to your e-mail

Look for T-Bonds to remain under pressure and for yields to rise, since this negatively correlating vehicle looks higher. Friday's peak not only exceeded a Hidden Pivot target at 45.56 by 0.09 points, it also refreshed the bullish trend on the hourly chart by impulsing above the "look-to-the-left" peak shown.

Early Sunday evening, the futures were easing toward 888.30, a minor Hidden Pivot support that can be bottom-fished with an initial stop-loss as tight as 887.90. The pattern looks like a good one, and that's why I'm recommending that only $40 (theoretical) be placed at risk. However, if you want widen the stop to include a "structural" support in the form of a prior low, 887.50 is a logical place to stop yourself out. If the futures rally to exceed 892.40 without having reached the downside target, it would hint that the correction from Friday's 903.80 peak had run its course. _______ UPDATE: As of 1:10 a.m. EST, the correction had gone no lower than 889.00. The 888.30 target was still valid but too stale to be appetizing, so cancel the order.

Comex Gold exploded on Friday for its best single-day gain in months, leaping halfway to a $952.30 rally target we'd disseminated to subscribers the night before.  We narrowly missed getting aboard at the overnight low when the March futures dipped fractionally beneath our 852.90 stop-loss just before taking off.  Here's the recommendation exactly as it was given:  "The futures appear to be wedging for a thrust to as high as 952.30, but first they'll need to beat a midpoint resistance at 876.90 into bloody submission. More immediately, much as I'd love to be able to flag a Hidden Pivot support that could be bottom-fished Thursday night, one at 853.60 that is available at this moment (i.e., 7:13 p.m. EST) is likely to be stale by the time you read this. If not, and it's still viable, an 852.90 stop-loss would be appropriate. A chart alongside shows the target." Since our projection implies that there's still another $50 worth of upside remaining over the near term, we've provided entry instructions for catching the low of a pullback Sunday night, if one occurs. We'll revise the instructions as appropriate once Gold has resumed trading late Sunday afternoon. (If you'd like to have Rick's Picks commentary delivered free each day to your e-mail box, click here.) Decoupling The rally was not only powerful, it appeared oblivious to the histrionics of the dollar and crude oil. Indeed, gold rallied sharply overnight on Friday even though the dollar was quite strong. But when the dollar faded later in the day, bullion went even higher, with the February contract closing just off its intraday peak near 903.80. Crude's rally was more closely in line with gold's, although in percentage terms it was twice as powerful. Is this the beginning of the surge that will finally push

We'll know soon enough whether Obama's presidency will begin with a soak-the-rich belly-flop on tax policy. He's said up till now that he would not even consider a tax hike, given the deathly state of the economy.  But if that is so, what were the usual suspects doing on Fox yesterday, telling Neil Cavuto that Obama has not really made up his mind? Nancy Pelosi was quoted as saying just that, and it could not have been just a casual remark. Two other dim Congressional lefties appeared on the show, and both had the chutzpah to argue that more taxes, if paid only by the "rich," would be better for us all. Cavuto, the best hardball interviewer in television, would have none of this. He pointed out that if taxes on the top two brackets were jacked up to their old levels under Clinton, it would raise only an additional $300 billion.  This compares with proposed new outlays of nearly $2 trillion, noted Cavuto. Whose taxes would cover the shortfall, he asked? The larger problem is Congressional Democrats' apparent failure to distinguish between real money and play money. When you talk about raising taxes to cover the deficit, you are talking about taking real money out of real workers' pockets.  That is far different from enacting huge stimulus packages and bailouts that everyone knows we will never be able to pay for anyway - at least, not with real money. Why saddle our most productive workers with back-breaking new taxes to finance outlays that exceed by tenfold our ability to pay for them? We've given a dozen reasons why all stock market rallies these days are just fool's gold. But if Obama doesn't get this one right the weight of despair is going to crush Wall Street, and soon. ***

With Google earnings due out, I thought I'd take a crack at targeting whatever lunatic action greets the news. My number is 318.08, a Hidden Pivot whose provenance is shown in the chart. This target is not one that I would use to intercept aggressively, but if you do attempt to get short, an initial stop-loss no wider than 26 cents is suggested. _______ UPDATE: Lunatic action has short-squeezed Gluggle to a so-far high at 323.10, but 332.32 was possible if these bozos blow out the 323.66 midpoint.

The Dollar Index was pussyfooting with the 85.47 midpoint support shown in the chart, but if it breaks down, look for the selloff to bring DXY down to at least 84.84. This would of course be very bullish for bullion, which has managed to move higher lately even with the dollar rallying. _______ UPDATE: The Dollar Index went postal after the above analysis was published. It was trading around 86.46 at 4 a.m. EST, presumably bound for at least 86.83. Anything above that would indicate more upside to at least 87.25.