December 2009

Someone in the chat room said the bullish tripwire I've set at 1154.60 is a bit ambitious, and I agree. But nothing less than that will do if we are to be "sure" that the correction is over. Even so, opportunities to get long speculatively with almost no risk abound, and I've have sketched just such a one in the accompanying chart. Remember, an impulse leg need only exceed one internal and one external peak to qualify as such, and the subtler the better.  "Subtle" is what you will see in this chart, and it is patterns like this one that will allow you to test the water a half-dozen times a day, initiating speculative long positions that are likely to make you a small profit even if you're wrong and the futures fail to get airborne.  There are a dozen people in the chat room intraday who know how to use patterns like the one shown, so don't hesitate to ask if you're not sure.

Touts will be out later this evening, although my thoughts on gold should be clear enough in Tuesdsay's commentary.  Gold is showing slight buoyancy in the early evening, but the E-Minis are in a shallow pullback that has yet to force a breakout.

This has been a great year for gold, but investors can’t seem to shake the jitters they acquired in 2008, when prices plunged 35% between March and October after poking briefly above $1000 for the first time. Is last week’s 10% selloff the beginning of another murderous correction? We don’t think so, although it could take a few more weeks for prices to consolidate for the next strong push.  But more immediately, we expect the Comex February contract to ease to a minimum $1090 in the days ahead. That would represent a $38 decline from yesterday’s settlement price and bring the total correction to slightly more than 11 percent. Although we nailed last week’s 1227.50 top within 40 cents and turned cautious, it is often easier to forecast interim highs in a bull market than to predict the precise course of a correction.  In any event, we’d suggest keeping the 1090 target well in mind this week, since, if it fails to provide a strong bounce, that would imply still more weakness to come.  In any event, using Hidden Pivot analysis, we can gauge the strength of the downtrend by the way it interacts with pivots both major and minor. While we remain somewhat negative on gold at the  moment, we’re prepared to turn bullish on a dime -- but only if very specific conditions are met.  In this case, February Gold would have to rally directly to at least 1154.60 after hitting a tripwire at 1139.30 either today or tomorrow. That would create a bullish “impulse leg” on the hourly chart – a feat that gold has accomplished once since last week’s breakdown, only to reverse unexpectedly the following day. Nothing Has Changed Technical considerations aside, there is nothing in the news to suggest that any of the factors

Silver Wheaton's nasty fall from a recent high at 17.45 hasn't much affected the profitability of the option position we established a while back. We have since modified it so that we hold eight December 12.50 calls with an effective cost basis of 0.40 and are short eight January 17 calls for 0.80. Our intention is to exercise the calls and come out of this Friday's expiration with 800 shares of stock as a long-term position.  No further action is suggested  at the moment.

These are interesting times, for sure -- nowhere moreso, unfortunately, than on Capitol Hill. A trillion dollar health bill appears destined to be excreted by Congress before New Years, despite the fact that 57% of Americans (and growing) staunchly oppose it. As recently as last week, it looked as though Joe Lieberman, the Senate’s lone independent, would put the kibosh on this whopping legislative turd when he issued an “over-my-dead-body” statement in opposition to the plan’s “public option.” Lo, there was Lieberman on the Senate floor Saturday afternoon, providing the 60th vote the Democrats needed to overcome a Republican filibuster.  Because Lieberman does not drive on the Sabbath, he’d walked to the Rotunda after morning services at his Georgetown synagogue 3-1/2 miles away. Couldn’t he at least have waited until Monday to betray his supposed principles and sell out most of those who elected him?  What amazes most about the health care bill is how it just keeps coming, like some sci-fi dreadnaught that is impervious to bullets, flames and bombs. The bill most surely is impervious to the barrage of negative newspaper articles that have tried to explain, in language that even the village idiot could understand, why this is probably the worst piece of legislation to come out of Congress since the founding of the Republic.  Reid’s Triumph of the Will  The villain of this saga, Sen. Harry Reid, is very much in the driver’s seat. He has earned our grudging respect for being able to push through Congress a political Trojan horse that has the potential to complete Big Governnment’s subjugation of the free-enterprise system under the New Deal. The fact that the plan would be colossally wasteful and that it would benefit only a small minority of Americans while making health care significantly more expensive for everyone

The rally pattern shown in the accompanying chart looks promising for a short at 105.86.  The C-D leg has been a tedious grind relative to the quick ABC, but it doesn't alter the logic or the odds of the 105.86 target eventually being reached. Officially we'll buy two January 106 puts (DIAMB), stop 106.01.

Friday's rally showed a faint yellow streak when it failed to take on a key high at 76.82 recorded on November 3.  That wouldn't be much of a feat if it happens today, as I expect it will, but the fact that the rally didn't achieve the benchmark on the first attempt argues against the likelihood that we are witnessing the beginning of a bull market in the dollar.

Friday's predicted snoozefest appears to be carrying into Sunday night.  This is not weakness, just inertia while DaBoyz await the next "news"-driven opportunity to grab shorts by their scrota.

We're using a Hidden Pivot at 1090.20 as our minimum retracement target for the near term, although a close look at the hourly chart reveals another at 1094.30 from which the futures could conceivably turn higher.  Either way, the February contract is likely to correct a further 1.8% or so before it would becoming an enticing buy.  Alternatively, buyers would need to push the futures up to 1154.60 today to stampede bears and end this so-far 9.5% correction. _______ UPDATE:  If Gold has bottomed and will not require a pullback to 1090, we needn't wait for an 1154.60 print to turn bullish.  Stay tuned to the chat room for camouflage entry opportunities.