April 2009

Here's the headline from Saturday morning's Boulder Camera  that pushed Colorado's big snowstorm off the front page: City Mulls Millions in Cuts.  Uh-oh. Could it have been just a few short weeks ago that we were reading about how Boulder's budget was well under control? The story then was that the city was going to have to watch expenditures more closely than usual because of the severity of the economic downturn. Now, though, they're talking about shutting down the recreation centers, fire stations, libraries and who knows what else.  There's also the dreaded possibility of "special tax districts" that would raise money to support services and amenities that most taxpayers must have thought they were already paying for in-full. Could this happen where you live?  We hope not, but if Boulder can be blindsided by this kind of news, it could happen anywhere. The town has never struck us as an out-of-control spender, as have other cities in which he have lived, including San Francisco and New York, and budgeting at the state level has always seemed relatively conservative.   Since a significant portion of Boulder's revenues comes from business taxes, shoppers and diners probably bear some of the blame for cutting back on frills. So what's the city to do?  They could try the Obama approach, exhorting consumers to keep spending money they don't have, presumably by borrowing it. Or, as appears more likely, they could cut back on outlays until the budget is back in balance. Too bad Boulder doesn't have the Bernanke option of financing prodigious increases in spending by purchasing its own municipal bonds. Ten million dollars raised this way would probably do a lot more good for the local economy than ten spurious billions would do for the U.S. economy. At least we could see

An aging downside target at ____ looks as compelling as ever, but for today at least, it wouldn't much to turn the hourly chart bullish. Specifically, a pop to _____ would do the trick. That would surpass more than the required two prior peaks needed to create an impulse leg

There are good reasons for not charging enthusiastically into Monday's opening, starting with the failure of Friday's rally to exceed a Hidden Pivot target that I'd drum-rolled in the E-Mini S&P.  There is also an Armstrong cycle date to respect, along with another from Paul Montgomery, a forecaster whose market calls have been described as "eerily accurate" by no less an authority on cycles than Peter Eliades.  In the meantime, we have some modest bearish plays working in Google and Microsoft, but the stock market will have to fall before we can spread off what little risk we have in these two stocks. We also have a bull calendar spread in the Diamonds that has ebbed into slight profitability, but it will need to ripen some before we take a partial profit.  I'll post more touts for the new week Sunday night, after electronic index futures have begun to  trade, so stay tuned!

It became clearer Thursday evening why the short-squeeze in Google reversed so precipitously.   Just after the closing bell, the stock shot up to $412 on headline news that the company's earnings had beaten estimates. However, more thoughtful ruminations followed just minutes later, focusing on a more sobering story. It was of a sort that we might have expected to cause Google to plummet.  Here's the substance of it, from the "Wall Street Journal":   "A Google Inc. (GOOG) executive said Thursday that seasonal patterns could become "more visible" in the current downturn, increasing concerns that Google could see slowing growth in the next two quarters." On balance, we probably needn't worry about the September 270 put that we bought yesterday for around $8.

With our Dow target at ____ in mind, I recommended buying the _______ call spread yesterday via a mid-morning post under Intraday Notes. Specifically, I suggested paying no more than 3.45 for the spread four times

I still don't see a ghost of a chance that the futures will not hit 871.25, at least, but if they exceed that Hidden Pivot by more than three ticks, brace yourself for more short-squeeze to a minimum 890.50. The first target was originally offered as a good place to try shorting with a very tight stop loss, but the number has been pretty well advertised by now, and some front-running is therefore likely to occur, perhaps catalyzed by your fellow subscribers. Also, the pivot is less than ideal for trading purposes because it coincides with some very important highs made in early February. If settlement today is above those highs, which lie respectively at 869.75 and 871.00, it would hint that bears will remain under pressure next week.

Much as I try to present the bright side each morning in my Gold tout, there is nothing to suggest that an old target at _____ will not be reached; moreover, if it should be exceeded by more than $1 or so, it would portend further slippage to at least _____.

Join me Friday morning at 11:00 EDT for an informal webinar that will focus, step-by-step, on the option strategy we're using to leverage weakness in Google between now and mid-autumn.  We'll also look at some "live" charts with the goal of finding profitable Hidden Pivot-based opportunities as the week draws to a close. The session is open to all subscribers and their friends.  Fifteen minutes before the webinar begins, I'll provide an ID code and an URL in the chat room that will allow you to access the session.

The option position could have been closed out yesterday for a gain ranging from $800 to $1,200, with the best opportunity coming on Goldman's dip to 118.65 about 90 minutes into the session. If you still hold the two July-April 115 and 120 calendar spreads (along with a single extra short April 115 call), you should exit it today rather than carry an unhedged position in the July calls into next week. Playing it down to the wire today would be risky, but not without commensurate rewards. Maximum theoretical gains of about $2280 on the entire position would come with the stock settling at $115