September 2009

We’ve always believed that the stock market’s ups and downs are driven not by anything so mundane as news events or the economy, but by the same mysterious cyclical forces that govern the physical universe. Nevertheless, two rapidly evolving news stories threaten to abruptly reverse Wall Street’s heedless bear rally, which recently entered its seventh month. The first story concerns the impending collapse of the Obama presidency. Although he ran a very impressive campaign, Mr. Obama appears hell-bent on committing political suicide.  The President is clearly obsessed with radically revamping the country’s health... Read the Rest of the Article | Comments *** Gold hasn’t made much headway since the beginning of the month, when COMEX futures surged $50 in the space of two days. With the dollar suffering from the vapors, there’s no compelling reason why the December contract should have loitered near $1000 ever since.  Granted, that’s a nice, round number, and it probably works smoothly with put-and-call hedges that allow bullion dealers to borrow as much of the stuff as they’d care to without risk. It is the same thing we see on expiration Fridays in the equity options market. When a stock gets “pegged” to a strike price, it’s possible for even small players to transact... Read the Rest of the Article | Comments *** It’s almost official:  the recession is maybe, probably, technically over. Helicopter Ben said so yesterday, and who are we to argue?  You can hardly blame the guy for having his head in the clouds, considering how retail sales absolutely exploded in August. Sure, it was due almost entirely to a cash-for-clunkers program that taxpayers have yet to pay for. But the program will have been a bargain if it helps foster the impression Americans are in a spending mood again. And if

A heads-up: TBT is approaching a bearish Hidden Pivot target at 43.39 that would offer a back-up-the-truck buying opportunity if it is reached. This would of course imply that the price of the underlying long bond is approaching an important top.

Apple's "story" has dimmed slightly with the recent announcement of dramatic price cuts for the firm's high-capacity iPods.  The news would probably be easily absorbed if the stock were trading at half its current price, but the rally in fact has looked like it needed a rest for the last 50 points. Accordingly, we'll use a Hidden Pivot target not far above, at _____, to try and get short. We'll have a better idea of whether the stock will actually reach that number once we've seen how far it pulls back from yesterday's high.  Anything exceeding _____ would indicate possible trouble.

Both gold and the E-Minis have been relatively placid so far tonight, although the latter telegraphed possible weakness on Friday by breaching a midpoint support I'd mentioned. Please note the target given for TBT, the Ultrashort T-Bond ETF, since it raises the prospect of an important top in the bonds themselves.

The futures look pretty neutral right now. Notice in the chart how yesterday's downtrend played out to within a single tick of a crystal-clear target on the 3-minute chart. Now, if the recovery rally hits or exceeds its target, bulls would be back in charge. _______ UPDATE (10:20 a.m.):  Gold's rally stalled a single tick above the 1019.40 target shown in the chart, and although I had said this would put bulls back in charge, I jumped the gun.  In fact, Gold needed to have exceeded the Hidden Pivot -- exceeded it by more than a single tick, anyway -- to suggest there's enough buying enthusiasm to take the futures to a new threshold.

In after-hours trading, the futures appeared to be struggling to reach the _____ midpoint of a minor corrective pattern projecting as low as _____. Either of these Hidden Pivots can be bottom-fished with a stop-loss as tight as 1.00 point, but if the trend reverses Thursday night or Friday morning, hitting ____ before _____, bears had better get out of the way. My immediate target thereupon would be _____, but with a good shot at _____ if it's exceeded by more than 1.00 point.  [Note: The interpolated over/under numbers for the December contract are, respectively, _____ and _____.]

Is the economy recovering?  Nowhere is there more confusion on this topic than in the pages of the Wall Street Journal. Anyone scanning just the headlines might think we’re on the cusp of a solid rebound: retail sales are up, home sales are starting to move, and the Fed chairman thinks the worst is behind us. It is only when one burrows into the newspaper, particularly the op-ed pages, that a more sobering picture emerges. The facts well behind the headlines can be pretty blunt, if not so say downright grim.     Yesterday, for instance, we read an opinion piece, “The Stimulus Didn’t Work,” by three think-tank heavies. The essay was labeled as opinion, but it got much closer to the truth than anything we’ve seen on the front page. The authors make clear that when income and consumption are plotted on a graph that takes government transfers and rebates into account, the effect of last spring’s stimulus was almost negligible.  Remember those tax credits -- $400 for individuals and $800 for many households?  And how about the $250 checks that were mailed out to retirees? Well, they caused barely a blip in consumption. This is true even if you control for the fact that oil and gas prices were higher.  Keeper of the Flame The authors would have sounded even more pessimistic if they had examined the effect of the stimulus, not on consumption, but on capital investment; for that is where a true recovery would begin.  Instead, they have taken the stimulus at its political face value, measuring its impact as though higher levels of consumer spending alone would have been a constructive result. This is most surely the premise of all the headline news, and it fits with the Journal’s steady mutation under Rupert Murdoch into a tabloid

When I published the Mini-Dow tout earlier tonight the futures were dithering at a Hidden Pivot rally target. They have since exceeded it by 12 points, suggesting buyers are revving up once again.  Expectations of a rally on a given day are running so high now that we really ought to be careful.  That said, please note that I've upped my target for the Mini-Dow to 10431.  Perhaps the obligatory surprise will be how quickly we get there?

Google is too hot right now for us to play catch-up, but because we have a score to settle, we'll be looking for any opportunity we can find to plunder the unwary.  The stock appears bound for -----, opening up the possibility of our buying cheap vertical spreads near the 550 strike.  The December spreads sell for a little more than three bucks, but we'll want to pay no more than $1.50 or so. That will require legging into the spread, buy side first. Stay tuned, since the trade must be attempted when the stock is falling toward a Hidden Pivot retracement target.