December 2009

This soporific excuse for a rally has been paradoxically fascinating to watch over the six weeks during which it has metastasized.  The observable fact is that there are practically zero died-in-the-wool bulls buying shares. Instead, even if an inch shy of brain death, the stock market remains oh-so-coy, impelled higher mainly by two factors:  too much financial liquidity chasing too few investment alternatives; and, short-squeeze opportunism driven by whatever shred of economic news could conceivably be spun as even faintly positive.   And what of the sell side?  Actually, there are no sellers.  Would you short this market? Neither would I.  Is there a speculator even financially able to short this market?  Probably not. Anyone with the brains and the guts to do so aggressively would have been beggared by the rally months ago.  Considering the foregoing, we shouldn't be surprised to see the broad averages continue to climb even as the U.S. edges toward the next, presumably spectacular, economic cliff.  To wrap up today's analysis, let me mention that it is for a reason that I would not short the E-Mini S&P at these levels: to wit, every pattern save the one associated with the long-term bear market is pointing higher.  I now see no end to the rally till at (the very) least 1146.50. We can short there till our heads cave in -- of course with a stop-loss as tight as a miser's squint in the noonday sun.

Here's a 240-minute chart that clearly shows the provenance of the 1059.80 target drum-rolled in today's commentary. Pivoteers should find some things to love here, including a "sausage B"  that was followed by another down-leg that exceeded no fewer than three (!) external lows.  The 'A'  is an over-the-falls, single-bar gem as well, and that's why I find the pattern so very compelling. If and when the futures fall to the pivot, you can bottom-fish there with a stop-loss as tight as $1.00.  If this should occur on Thursday, I'd suggest exiting the trade if it has not gone at least $6 in-the-black by the bell.  Please note:  The bullish benchmark at 17.605 that I've flagged in Silver has an analog at 1122.75 in February Gold. That would be quite a rally, for sure, but it would take no less than that to dispel all doubts that bulls are back in the driver's seat.

February Gold was playing toe-sies with some minor supports Monday night, having traded three ticks below a Hidden Pivot midpoint in very thin action.  Signs are not encouraging, although the Dollar Index will face some potential rally-stoppers not far above.

Yesterday's low missed a 416.43 target by less than half-a-point, but this will have bullish implications only if HUI now reverses and hits 459.43.  A close below 416.43 would open a path to as low as 390.91 over the near term, but there would be a last-ditch opportunity to turn from 415.39, the midpoint pivot of the pattern shown in the chart.

A Hidden Pivot rally target at 78.35 should show some stopping power, but if DXY gets past it, look for the buying spree to continue to at least 78.72.  A move to the latter number would imply that February Gold is likely to find only fleeting support at 1090.

Yesterday's gap-up opening pointedly took out a midpoint resistance at 1104.50, all but guaranteeing a follow-through to the Hidden Pivot's 'D' sibling at 1120.25.  It can serve as our minimum upside objective for the near-term, but boarding the uptrend will have to be catch-as-catch-can, since the opportunity may be past by dawn.  If you miss the ride, shorts from 1120.25 are encouraged, stopped as tight as you can handle.

A major trendline and two notable Hidden Pivots come in around $1090, so we'll just have to cross our fingers. Gold is obviously a speculative buy here, but the chart leaves no doubt  that a decisive breach would grease the skids down to as low as  1028.  That was the point of departure for the powerful rally begun just before Halloween, and it is a logical downside target in the event of a breakdown. Traders looking for a camouflage opportunity to get long should focus on the three- and five-minute charts all the way down to 1086, since a false breakdown could conceivably need that much space to panic nervous traders.  (Late note: a midpoint support at 1093.30 must hold Monday night if a bullish turn is coming.  This appears unlikely at the moment.) 

The recent collapse of bond markets in Greece threatens the very stability of the European Union. Although there is talk of a bailout, the country may be too corrupt for a rescue attempt to do much good. How bad is it?  The answer to that question is startling, as the following report makes clear. It is from a Rick’s Picks subscriber who lives in Greece and believes the country’s economic potential is being squandered by a political spoils system that deeply permeates the business culture at all levels. He writes as follows: “Greece is a beautiful, mountainous country with diverse natural scenery. Geographically, it occupies the majority area of the ancient Hellenic world at the southern part of the Balkan peninsula and the eastern part of the European community. It has a land area of 130,800 square kilometers. Its coastline extends for 13,676 kilometers, with 227 inhabited islands that rest on a sea of amazing clarity. Historical monuments abound, making the land a virtual museum and attracting millions of tourists every year. It has a population, according to the 2001 census, of 10,964,020, and a per capita GDP of $30,681. It boasts the largest ownership of shipping tonnage (tanker and cargo) in the  world, with a total dwt of 141,931 thousand. It owns some of the largest natural resources in specific minerals in the EU, such as bauxite, magnetite, nickel, and perlite.  There are also has anhydrite, gypsum., bentonite, gold. cement, magnesium compounds, pumice, and of course marble. In addition it has large flocks of livestock and fish stock. The abundant sun shine and the winds make it potentially self sufficient in clean energy.  Naturally Blessed  “For all of its natural blessings, Greece is not producing sufficient wealth to repay its obligations. Foreign debt is estimated at € 200 billion. The

“Deflation suddenly is looming, crowding out the prevalent global view that only higher inflation can possibly be ahead. QE (Quantatative Easing) isn’t working; money pumping, once thought a flawless cure for crises, now falls flat, from lack of confidence. QE is, in fact, having the opposite of the intended effect as it’s obviously a ploy, &  QE simply adds to debt, which now chokes the holders. Gold can handle deflation nicely, but not much else can.”