August 2009

I had to check Edwards & Magee to see whether yesterday's weakness may have compromised the bullishness I inferred from the island gap reversal in this stock. My guess is that the renowned authors of Technical Analysis of Stock Trends would have seen it as a mutant specimen of the genre to begin with, since the two gaps do not overlap. In any event, if we simply look at it as a routine abc pattern, filling in the gaps with hypothetical, unbroken bars, as we are wont to do, a _____ downside target comes into focus, subject to a bounce from the _____ midpoint. In fact, the bounce has occurred from 158.00, so we might infer that a dive to _____ awaits if the midpoint is breached decisively.

We popped up on the "wrong" side of the inflation/deflation argument here the other day with a hyperinflation scenario that seems to us not just possible but likely. Although we hold fast to a prediction that deflation is going to run its course, throwing tens of millions of Americans into bankruptcy, before relief comes to debtors, we are persuaded that at some point well down the road the U.S. will throw the switch to hyperinflate.  Even so, we believe that the attendant collapse of the dollar will play out far more quickly than the collapse of the German mark during the Weimar hyperinflation of 1922-23. So swiftly will this occur, in our opinion, that the hyperinflationary spike will begin and end in mere weeks, leaving deflationary to dominate both before (as it continues to do now) and long after.  A contributor to the Rick's Picks forum, Ed M,, disagreed -- mainly, he said, because there is no precedent for so swift a collapse of a sovereign currency. We present his argument below, followed by our response, but also some interesting thoughts of Ed's concerning barter.   Here's Ed: "The idea that a hyperinflation would come and go in a few days or weeks has no precedent, and, as such I give it little credence.  However, the question for those owning [precious metals] concerning what to 'transfer' one's 'profits' into, is very relevant.  Furthermore, there is the issue of taxes on what could be, at least nominally, outsized profits. So, while leaving the question of what to buy momentarily behind, let me offer that arranging some sort of barter might be the way forward for [precious-metal] holders. "Choices of what to purchase will be more or less the same in future as they are today, but in what will likely be a chaotic

In the camouflage category, this session ranks as a classic of the genre, since we were right on top of Google when it gave us a very nearly riskless opportunity to get long on the one-minute chart. We were on board from the moment of takeoff and never had to look back. What made the trade so delectable was that the stock looked heavy until the moment it tripped our entry signal. The set-up we used also demonstrated that if a trader is patient, he or she will eventually find an opportunity to initiate a trade more or less risklessly that can make the week.

It's 3:38 a.m. in New York, and Asian markets are getting whacked. I've lowered the bid for Goldman calls to "stink-bid" levels, since it is still the stock to own if you're looking for upside exposure.  A bid for Akamai shares can stand as given, since we're only risking $6o theoretical to try and scoop stock at a Hidden Pivot bottom. It should be interesting to see how Goldman shares react to a global cascade, assuming there is one, but a bearish island-gap reversal at this point -- very rare indeed -- is likely to become a daunting impediment.

The bonds have looked pretty good these last couple of weeks, but it's been nearly two months since any rally managed to create a bullish impulse leg on the daily chart. There have in fact been three failures to do so, and this will make a fourth if it fizzles out anywhere south of _____.

It's do or die here, since UNG looks likely to grope its way down to at least 11.31 if it doesn't pick up support from mid-July's lows near 12.

The maniacs who dominate in this stock left a relatively rare and unquestionably bullish island-gap reversal on the hourly chart yesterday, threatening bears with a frontal assault if they should grow too bold. Since Goldman is still our favorite bellwether, we should take the threat seriously to the extent that the stock is capable of dragging the entire market higher if it catches fire.  I had suggested a mechanically inspired short in the SKF Ultrshort Financials -- a bullish play on the banks -- and this latest development in Goldman seems to explain why SKF's rally could be short-lived.  Instead, let's speculative modestly in Goldman itself, bidding 2.60 on the opening for one ____ call. If the order goes unfilled, lower the bid to 2.40 and keep it there as long as the stock doesn't fall below 160.00.

The downside target at 17.04 is still valid, so let's try bottom-fishing there once again by bidding 17.07 for 400 shares, stop 16.89.

The rally off Monday's secondary low (931.80) projects to _____-- 1.50 points above yesterday's high. The target is still valid, although it would have made a better short if it had been hit on the first try, a modest spike this evening around 8:30 p.m. EDT. What matters most at this point is not that a would-be opportunity has curdled, but that the futures are not showing enough oomph, even, to reach a relatively easy target.  That could still happen tonight or Wednesday morning, but I'd need to see a thrust exceeding 946.20 to be convinced that buyers are capable of taking charge. With a 950.70 print, they would BE in charge.