June 2009

I've flagged a potential opportunity in August Gold for night owls as  well as another in the E-Mini S&P.  Those who are in the Silver Wheaton trade are advised to roll the calendar spread, since it is nearly as fat and juicy as it's going to get between now and next Friday's expiration.  If you get frazzled and befuddled attempting to get into this morning's briefing, here's an easy way:  browse www.JoinWebinar.com, and then use the session ID 252 852 346.  The password, if you're prompted for one, is 'hiddenpivots'.  There are nearly 700 people registered for this session, so I wouldn't lean too heavily on any Hidden Pivot swing points that are discovered during the briefing.

We could easily book a profit of about $450 on our September 10-June 10 calendar spread, which we hold with an adjusted CREDIT cost basis of 0.10.  However, since we're positioned in the July 12.50 calls already, let's simply roll the spread into July and try to build yet more edge into the position. To do this, we'll need to sell the June 10-July 10 calendar spread four times (i.e., covering the four Junes and shorting four Julys). Do this for 0.50, then please let me know in the chat room when the order is filled. _______ UPDATE (10:50 a.m.):  Rolling the spread for 0.50 has been fairly easy this morning, since that price is midway between the quoted market of 0.40-0.60 (i.e., the most you would pay for the spread is 0.60, buying (i.e., covering) the June 10 calls on the offer while shorting the July 10 calls on the bid; and the least you would sell the spread for is 0.40, shorting the July 10 calls for 0.90 on the bid and buying the June 10 calls for 0.50 on the offer ).   Imputing the gain from our Sep 10-June 10 call spread to the Sep 10-July 10 we now hold will allow us to carry the spread for a credit of 0.60.  That means that no matter what SLW does between now and July expiration, we will make at least $240; and if, ideally, SLW is trading around $10 at that time, we could make as much as $640 (with the spread going out for 1.00). Keep in mind that we also own four July 12.50 calls @ 0.30 that will give us a bullish "kicker" for the next month.  

Gold's jitters during the last few days have been tradable only by scalpers, since there doesn't seem to be enough wattage to push into the supply zone created by last Friday's downdraft. However, yesterday's weakness created an enticing pattern whose ____ midpoint can be bottom-fished  with a 50-cent stop-loss. If this Hidden Pivot support gets busted, look for the downtrend to complete to ____, the midpoint pivot's 'd' sibling. Alternatively, we should want the futures to close above ____ today (the c-d midpoint of an uptrend on the hourly chart begun from 938.20 on May 26) before we take encouragement.

The rally begun a week ago needs to close above _____ today or tomorrow to suggest that it is likely to fulfill the _____ promise of its impulse leg.  _____ is the c-d  midpoint of the rally pattern, and the resistance thereof must have intimidated buyers yesterday, since they retreated well shy of the benchmark.

But for one deceptively small but significant detail, the rally since March bears an eerie resemblance to the one that  swept the Dow Industrials 3000 points higher between early 2003 and 2004.  The inset chart shows the Dow rally, and why it forced me, a bear's bear, to stay bullish on the stock market as it consolidated for several years near the 10000 level. From a Hidden Pivot standpoint, the key was that the rally from the 2003 created an impulse leg that did not break into a b-c correction until it had surpassed the peak recorded in early 2002.  This time, however, the same rally -- but on a much smaller scale, and lying within a larger bear-market downtrend -- has failed to get past the equivalent peak on the first try -- and that is one of the strongest pieces of evidence that the powerful market surge since early March has been corrective rather than impulsive.  More immediately, looking at yesterday's action, we saw a bounce from within just a few ticks of a trendline that I drew during yesterday's pre-opening briefing.  The day's gratuitous ups and downs aside, it did nothing to alter my expectations of a surge into the 980s. Because I do not trust the market one bit, however, we will stay close to the lesser charts, the better to discern any clues that "expectations" on the part of the crowd may have mutated into complacency or worse. For the moment, night owls can try bottom-fishing at ____, stop _____, provided the point 'c' of the relevant pattern,  946.00 (at 9:10 p.m. on the 5-minute chart), is not exceeded first.

The bonds have fallen so hard in recent weeks that a targeted low that once seemed like Armageddon territory now lies within easy distance.  I broached two targets here yesterday, and both can be bottom-fished with a stop-loss as tight as 4/32nds.  The first lies at 111^07, the second at 110^07.  Either Hidden Pivot has the potential to produce a major low, so we'll keep  a close eye on any rallies that occur therefrom. _______ UPDATE: (2:54 p.m.):  Following a weak opening, the long bond is enjoying one of its strongest rallies in months, propelled by the hoard of buyers who showed up at today's Treasury auction unexpectedly clamoring for specious product. Since the rally is coming off a low at  111^21 that lies less than a half-point from our 111^07 target, we have to be alert to the possibility that this could be a major reversal.  Cancel the bid for now.

We side with the rabble rousers - Chris Dodd, Barney Frank, and all the other hard-core lefties in Congress -- on the corporate pay issue. For every CEO who got an eight-figure bonus in recent years, we knew a dozen guys personally who could have gotten the job done for $250k and a health plan. Dick Grasso, the former head of the NYSE, was the last straw. After a four-year legal battle with Elliot Spitzer over his nearly $190 million compensation package, Grasso prevailed in the Appellate Court. "From the get-go, there was never anything improper," he told reporters after the decision.  Improper? Perhaps not. But indecent?  For sure. The Wall Street Journal  had the chutzpah to assert that Grasso was worth every penny of the huge bonus he got for running the exchange for eight years. In fact, like Bill Clinton, he was simply in the driver's seat when economic cycles were at their most felicitous ever.  As a result, like so many other executives working at his pay grade, Grasso benefited from share prices that were so ridiculously inflated that no one noticed when tens of millions of dollars were skimmed by the corporate brass.  Thumb Twiddling Ahead? To help rein in executive pay, Geithner has appointed Washington attorney Kenneth Feinberg as "pay czar."  We don't know what Feinberg's plans are, but he may wind up twiddling his thumbs as the U.S. economy sinks deeper and deeper into depression. The Obama Administration's proposal would give shareholders a voice on executive compensation. But then, shareholders have always had a voice; they just chose not to say anything. That's the way the fat years played out:  shareholders' IRAs were reaping steady gains, and anyone with money invested in stocks was making money. Who cared whether top-level executives were getting filthy rich?

This session is one of the best ever. We spent most of the hour finding all of the tradable possibilities in the intraday charts of July Crude. A large pattern was predicting a $7 rally, from $67 to a potentially important top near $74. However, our strong incentive to find a way to get long came days earlier, when a thrust exceeded the $74 target's sibling midpoint. Thereafter, we discovered nearly riskless opportunities to get long within moments of the ultimate bottom at 66.78. If you want to see the value of "camouflage" in intricate detail, this session is an absolute must.

A busy morning ahead: Morning Briefing at 9 a..m. EDT followed by the regular, Wednesday tutorial session at 11.  In between, I'll be interviewed by BBC's oracular wild man, Max Keiser. The result should be available shortly afterward via You Tube, so look for the link under Intraday Notes.  Here's one for the briefing, in case all else fails: https://www2.gotomeeting.com/register/252852346