June 2009

By failing to take out anyinteresting peaks on the intraday charts, yesterday's quasi-rally left bulls something to shoot at today:  i.e.,  two peaks -- an internal and an external -- that need only be surpassed to generate some heat on the lesser charts. I won't hazard a prediction as to whether this will occur, but if not, it would leave the August contract vulnerable to at least _____, a somewhat obscure Hidden Pivot that comes from the 15-minute chart (A=966.00).

Yesterday's dirge left a soggy mess on the intraday charts -- a would-be predictable event for today that is not worth predicting. Scale up to the 180-minute bars, though, and it looks -- still -- like consolidation for a push into the 980s, at least. If so, I can't say when all the excitement is likely to begin. However, as you can see in the accompanying chart, a thrust today exceeding ____ would be fresh meat for traders made hungry by the emptiness of Tuesday's action. Not camouflage, for sure, but perhaps we'll be able to get a handhold nonetheless. Stay tuned.

The jury is still out on our favorite stock market bellwether, Goldman Sachs, since the shares of the well-connected banking firm failed yesterday to push above an important Hidden Pivot resistance at 151.24. Although the stock popped just high enough to stop us out of a profitable short position held from within a penny of the recent top, the rally fizzled after a head-fake on the opening. Goldman ended the day up just 56 cents, performing in-line with a generally turgid market. Yesterday we said Goldman could cruise all the way up to 171.87 if it gets past a lesser Hidden Pivot resistance at 153.50. Although Tuesday's price action arguably left the stock in a bullish holding pattern, one might have expected more, given that ten of America's biggest banks have been deemed sufficiently healthy to allow them to pay back $68 billion in TARP money that they borrowed from the Treasury. Perhaps those who bought the rumor of the banks' return to nominal solvency were not impressed by the news, but in our opinion yesterday's bullish TARP story should have given more boost to the financial sector as a whole.  So why did the news fall flat? We'd like to think investors have figured out that the buzz can't get much better for the banks. After all, the purpose of TARP was to pump up the share prices of banks so that they could raise capital by unloading said shares on the usual suckers. But now that that has been achieved, what comes next?  The feds may be able to sustain the illusion that the banks are "healthy" for yet a while longer, but sooner or later it will become evident that would-be borrowers are not in such great shape themselves. That is an illusion far more difficult to create,

On the June T-Bond's daily chart, the clean lines of the downtrend strongly imply another leg down before sellers might conceivably be washed out. To be precise, the unachieved target lies at _____, a nasty fall from yesterday's settlement price of 115^02.  The bearish outlook is corroborated by the ease with which sellers punched through the midpoint sibling of the target, 118^00.  Another negative is that downside targets derived from two lower point 'A' alternatives -- labeled A1 and A2 here --  have already been exceeded.

Subscribers can access this morning's briefing by going to www.JoinWebinar.com and providing this session ID:  241 248 339;  then, if requested, the password 'hiddenpivots'.   I'll try to cover some issues that have engaged the interest of the chat room recently. The session will begin at 9 a.m. EDT sharp.

I'll try to cover the tradable angles in Tuesday morning's briefing, but the big picture has turned disappointing with August Gold's recent failure to create a bullish impulse leg on the weekly chart.  As you can see, although the thrust to peak #1 got past two prior peaks, it died in a two-stage correction; now, the second thrust is dying/correcting after failing to take out a second peak. These are squandered opportunities, and although the long-term picture is most surely not bearish, neither does it offer much evidence that Gold is ready for a blast into the next galaxy.  That could change with a quick surge touching  1020.80, but until that occurs we should look for more consolidation in the days and weeks ahead.  

We hold the June 43-45 call spread for 0.55, although our best opportunity to unload it for a gain may have come and gone when GDX topped last week at 45.10 after a two-week run-up from 35.7.  Let's shoot for a modest gain on the exit, offering the spread for 0.60, g-t-c.  That price is out of range at the moment, but it would become easier to fill if the stock moves higher this week.  It would be a lay-up to simply close out the 43 strike first on any strength, leaving the 45 naked-short, but we don't work that way, since not all subscribers' accounts are enabled for such allegedly risky transactions. ______ UPDATE: GDX rallied on the opening, pushing the spread up to 0.65 (i.e., at the same time the June 43 calls were peaking at 1.15, the June 45 calls we are short could have been covered for 0.50, their intraday high.  A fill at 0.60 was easily possible, so I'll record this one as a scratched trade -- in and out with no loss after commissions.

We hold a single September 270 put acquired a while back for $8 that is about as useful and pleasurable as a hangnail. Before it goes to its reward, let's look for a way to offset the likely loss, since this stock, a throwback to the Dadaists,  has a chance to move up to 507.24 within the next 4-5 weeks. Our strategy will be to leg into a calendar spread at the 510 strike, starting with the long call first.  September 510 calls (GOPIU) are currently trading for around 7.00, and the September 510-July 510 call spread for about 5.00, but we'll try to put it least somewhat better by buying the calls when the stock corrects to a Hidden Pivot low. Our goal for purchasing the spread is $3 or so, and if we can get in at the price, our odds of recouping the loss on the put and then some will be pretty good.  For now, bid 5.20 for one September 510 call, good for the remainder of the week. ______ UPDATE: Google swooned $7 this morning, but the calls we were trying to buy traded no lower than 5.90. We're on the right track, but we won't pay up. Continue to bid 5.20 for the calls, which are too prized by market makers to  come easily. For your own purposes, keep in mind that our efforts are premised on a powerful rally. _______ FURTHER UPDATE (June 3, 10 A.M.):  The order filled this morning when the Sep 510 calls traded down to 5.10. At the time, the stock was bottoming near 430, down nearly $6 (although it eventually went $4 lower, recovering partially by day's end).  For now, do nothing further. Keep in mind that our rally target for the stock is above $500, and that our goal is to spread off the call on the way up.

Two minor Hidden Pivots just above will  not be worth much to us, since both coincide with highs recorded, respectively, yesterday and Friday. For the record, the higher of the pivots lies at 957.00, two tick off Friday's peak. That makes resistance there doubly daunting, so any thrust that makes short work of it, pushing through granite within 30 or so minutes of first touching it, should be presumed a warm-up for more bullish action. ______ UPDATE (1:47 p.m.): I suggested shorting 944.75 with a three-tick stop-loss during this morning's online briefing, and the trade would have worked nicely, since the futures dropped 10 points thereafter from a 945.25 top that is still holding. The failure of the futures to reach the 955.25 'D' target associated with 944.75 telegraphed the day's weakness, although Wednesday will likely be a different kettle of fish.