December 2009

An unachieved downside target at 416.43 beckons, and so we'll use it as a minimum objective for the correction begun on December 2. Alternatively, the Gold Bugs Index would need to reach 470.54  this week to turn the hourly chart unambiguously bullish.

The move from the December 1 low at 74.27 is still  uncorrected, demonstrating once again that there is nothing so bullish, technically speaking, as a rally that is insanely overbought. This one most surely is, and it  could become even moreso this week by surpassing two or three more external peaks.  From a Hidden Pivot perspective, the nearest target we can use for a benchmark lies at 79.03, a Hidden Pivot.  Its midpoint sibling is 78.36, exactly 0.22 points above Friday's high.  If the midpoint is easily breached, consider the higher target a done deal.

Sunday's night's modest stab has reached 1102.00, but it will take at least 1104.25 before there's something useful to notice about the hourly chart.  As you can see, it would take only a small thrust to breach peaks #1 and #2 and create an impulse leg.  If the thrust were to apex just a tick or two above #2, then pull back into a B-C retracement, that could conceivably create excellent conditions for a camouflaged entry.  Don't expect too terribly much, though, since there are no indications this would be the breakout that finally gets the futures to an 1128 target first identified here an eon ago.

The futures appeared bound Sunday night for 1128.70, a minor Hidden Pivot that is tied to a midpoint resistance at 1118.40.  The rally would surpass some small peaks made on the way down Friday, but to qualify as impulsive on the 30-minute chart, it'd need to get past 1132.30 by day's end.  Our "gold standard" for a decisive turn, however, is still a print exceeding 1154.50.

Time magazine chose Helicopter Ben as “Man of the Year,” supposedly because the financial system would have collapsed if not for the unprecedented emergency actions pursued by Mr. Bernanke’s Federal Reserve. We’d say the jury’s still out on that one, since Phase II of the central bank’s ingenious recovery plan – i.e., pray that the mountain of worthless debt still held by the banks eventually rises in value – has yet to bear fruit. We’re skeptical ourselves that this can or will ever occur, since there is no way the mortgage collateral that underlies much of that debt will ever return to anything remotely approaching the boom levels that obtained before the subprime lending market collapsed in 2007.  Our skepticism is based on a more general concern as well -- namely, the not unreasonable suspicion that huge new amounts of borrowing are unlikely to cure an economy already suffocating from debt.        However things turn out, and in the meantime, we’d like to nominate our own Man of the Year:  Mister Market. Usually this personification implies an all-seeing, all-knowing force that works sort of like Santa Claus in reverse. Whereas Santa makes a list, checks it twice, and knows which kids have been naughty or nice, Mr. Market plays no favorites.  Indeed, regardless of whether an investor has been as wicked as Ahmadinejad or as virtuous as Mother Theresa, Mr. Market will see to it that he gets the kind of screwing that we usually associate with the nether reaches of the Nine Circles of Hell. And don’t dare show the smallest sign of nervousness about any speculative outcome, since, when Mr. Market smells weakness, he will take special pains to single out you, first of all, to pay the price.  This is Mr. Market’s proper role, and we can be certain

Over at National Review Online, here'san interesting note on Bernanke's confirmation from, of all people, Larry Kudlow:  The Senate Banking Committee voted 16 to 7 to reconfirm Ben Bernanke today. That’s nothing to brag about, and with the reconfirmation vote now headed to the Senate floor, I think Bernanke could be in trouble. Over on my NRO blog, I write:  "I’m going to bet that most of the 40 Republicans will vote against him, and that they will be joined by a number of Democrats. If Bernanke were to be opposed by as many as 35 or 40 votes, it would substantially undermine his credibility."  This leads me to wonder whether Helicopter Ben should withdraw his name.

There's no telling what Whacky Friday will bring with stocks and commodities in such a high state of agitation.  The broad averages will be under extreme tension, impelled higher by technical factors and seasonality, but tugged in the opposite direction simultaneously by the growing suspicion that America's political leadership is descending into irreparable acrimony and chaos.

When the December options expire today we'll hold 800 shares with a cost basis of $12.90 against eight January 17 calls shorted for 0.80.  Although the calls are likely to expire worthless, further lowering our cost basis, they'd be worth covering right now if we could get them in for 0.15.  Accordingly, I'll suggest bidding 0.15 to close, good for the day. If the stock slips below 14.50, however, lower the bid to 0.10 and leave it in through Monday.

The rally from a 162.11 pivot was fun while it lasted, but the stock has now relapsed and looks bound for a minimum 157.37.  This Hidden Pivot has low value for trading purposes, however, because it roughly coincides with some important lows recorded back in August. A bigger picture projects 153.13, which would be the death knell for Goldman, cracking a series of supports that took most of last summer to construct.