July 2009

In today's Side Bets, I've flagged a couple of bearish targets for the Dow Industrial Average that look like lock-ups. They corroborate a darkening picture for the E-Mini S&Ps that has been detailed by Ira in his recent analyses. While the targets can be bottom-fished, if they prove flimsy they will also be warning that the downtrend may be gathering strength.

The Dollar Index may feel like it's revving for a push higher, but I have my doubts it will get very far, since the last two thrusts narrowly failed to get past some prior peaks.  This isn't the way frisky bulls act when they are ready to run.

The same sausage-y pattern I've flagged in the E-Mini S&P projects to 8035 for this vehicle, or perhaps 7964 if any lower. I would rate these numerbs as high-confidence, since the Indoos spent the last two days turning the midpoint support into resistance.

Gold is having trouble sustaining loft and may have to go lower to buy some R&R time.   However, a pop today touching 936.40 would put bulls back in charge, since that would create a robust new impulse leg on the hourly chart (see inset). Upside potential thereafter would be to as high as 952.80 over the near term; otherwise, the downside targets given here previouslystill obtain: 899.00, and  895.50.

The point 'B' of the pattern shown is about as sausage-like as it gets, having failed to take out the May 28 low at 881.50, but it may be overshadowed in this case by an overall symmetry that is too graceful to ignore. If the downtrend from the June 11 high plays out accordingly, we should look for the futures to bottom at ____ (or possibly at _____ if the one-off 'A' at 942.75 prevails). I won't speculate as to what might happened when either or both of these targets is reached, but a failure to rebound would naturally be bearish for the longer term. Either number can be bottom-fished with a tight stop-loss, but it will be less risky to enter on the "camouflage" of a subtle reversal occurring from near those pivots.

Gold continues to hang tough in the midst of oil's nasty selloff. Although August crude has fallen more than 14%, from last Tuesday's peak of $73.38, a Comex Gold futures contract expiring the same month lost just 2.5% of its value during the same period, falling from $947 to $924. The fact that gold has not plummeted in sympathy with oil strongly hints that it will be quite feisty when selling in the oil pits finally lets up. It was triggered by fears that the alleged global economic recovery is much weaker than had been thought. One might have expected investors to be prepared for this turn of events, but apparently not. The selling of oil began in earnest in connection with an uptick in job losses reported last week by the Department of Labor, and a 0.1 increase in the U.S. unemployment rate. But it has snowballed since, lending weight to the notion that investors really were surprised by signs of renewed weakness in the U.S. economy.   The jobs data could not have surprised anyone who has shared anecdotes about the economy with friends, neighbors or colleagues. However, it would seem that the government's statisticians and spinmeisters are in a warp that rules out such evidence. But then, why would they even want to consider the big picture if it undermines the government's aggressive efforts to convince us that the economy is bouncing back?  This is evidently what we are suppose to infer, based on data as ephemeral as a weekly report on California home prices. Granted, they are not falling as steeply as before; but California is itself in a state of financial and economic collapse, and that should more than suffice to quell all of the inane happy-talk.  Just Look Around You Unfortunately, we can see no

This chart like so many other index charts doesn't seem to want to come down. There has been massive downside pressure being applied to the daily chart and price hasn't even moved down 50%. If there are any surprises with the earnings reports there could some fireworks and increased volatility. As you can see from the chart price is approaching support at the ___ level. I am using the round number as there are several support prices around this level on various charts. For price to start a retracement higher price would have to go through ___ and then it could rally in 1 point increments. The up numbers are based upon the current low. The pressure indicator has entered an over extended area on the chart.

Another fascinating report from the field, from a Rick's Picks subscriber whose NYC-based brokerage firm specializes in Third World markets, including Zimbabwe: "We do business in 128 countries and trade daily in 35-50 markets; Belarus however is not going to be our 129th soon.At our first meeting this morning, Gennady Barzdov, Head of Securities Operations at the Central Bank, made it quite clear that the existing stock exchange cannot handle transparent transactions, settle or custody equities. Nevertheless the government's 2009-15 plan to develop efficient trading systems is approved and we encouraged him (by the way Mr Barzdov could easily stand-in for Vladimir Putin) to focus on the 2009 portion as investors would certainly like to look at Minsk Tractor Works or Krinitsa Brewing (from which we had a fine beer last night). Beyond this disappointment Minsk, the capital, where we are today is a remarkable city of broad boulevards with late model European cars and classic soviet buildings with the squeaky clean look of Singapore. A recent 25% devaluation makes life cheap for once using our USD and dinner at the lively local favorite Minsky-Zamak for Alex and me came to all of $25 for a classic borscht, caviar, blini, vodka, and Alivaria Beer repast. Belarusians are friendly and often remark that they do not see many Americans here. We also heard this at the Central Bank. Weather-wise it's cold (65ish) and rainy on this windswept glacial plain and tonight we drive to Lithuania."

This morning the markets are mixed.  The Asian markets are down and the European markets are up.  The E-mini is down a bit before the open which should have the Dow down between 10 and 20 points on the open.  Gold and oil are up a little along with the majority of the other commodities.  The exceptions are cotton and lumber at this time.  It appears that world waits for the second quarter earnings reports which starts tomorrow.  The big question is the US Dollar. (Ira)