March 2010

Gold followed our script closely yesterday, peaking overnight a dime from a Hidden Pivot midpoint that had been flagged as a place to get short, then dropping to marquee support at 1100. The 1095.50 correction target is still valid in theory, but opportunity would favor bulls on a print exceeding  1114.10.  The chart shows the importance of this number, and although a move above it would compromise any camouflage we might be looking for, the resulting ABC pattern could yield a very low-risk entry to those who are nimble enough to act on a fleeting B-C pullback. _______ UPDATE (10:04 a.m. EST):  An entry opportunity precisely like the one shown opened up in the middle of the night. The futures popped to 1114.20, exceeding the look-to-the-left peak by a tick, then pulled back for 15 minutes to form a point 'C'  low at 1112.70. Entry was at 1113.40 for an 1115.40 target, but you could have ridden a larger, bullish pattern to the eventual top near 1119.00. The futures dove thereafter, turning the rally into yet one more gratuitous hump.  Gold's next big move will be up, but it quite evidently isn't ready to fly yet. The 1095.50  correction target is still valid, but there is now another at 1092.00 that corresponds to a Hidden Pivot midpoint at 1105.70 providing support at this moment.

The brazenly bogus unemployment data disseminated to the news media each month by the U.S. Bureau of Labor Statistics appears to have tripped up Colorado. Although the state had reported a loss of 89,375 non-farm jobs in 2009, the actual number appears to have been much larger -- 106,300, according to the latest revision.  Colorado attributes the discrepancy to the Bureau’s rosy estimates of the number of businesses that start and fail each year. Until the new numbers came out earlier this week, Colorado’s official line was that it had somehow been spared the worst of Great Recession’s effects on the labor market. Unofficially, however, the picture was never so bright. “I was surprised when they reported the numbers the first time,” Zoltan Mak, a freight-train conductor on furlough since October, told the Denver Post. “I see everybody around me scraping by and having a really hard time. I don’t think we’re any better off than any other state.”  As much could be said of the supposed economic recovery in the U.S. that we keep reading about but which few workers or businesspeople are able to corroborate.  In the Rick’s Picks chat room, for one, out of the many hundreds who log on each day, there has been only a single person who has reported an upswing in business. He lives in the Michigan rust belt, of all places, and that is why his claims have met with skepticism, to put it mildly. But here in Colorado, the notion that recession has been somewhat less severe than elsewhere is flatly contradicted by a blighted retail landscape that seems to be metastasizing with each passing week. Entire strip malls and even some larger malls in the Denver area have imploded, and in our own neighborhood, a Sam’s Club called it quits.

In the wake of Dubai's financial plunge, a very bullish picture has emerged from Auerbach Grayson's recent regional equity conference in Sharm el Sheikh.  "There are a lot of things to buy in the Middle East: banks, real estate developers, ceramic makers and white goods producers," writes one of the attendees, Mike Churchill, of Churchill Research. For his account of the big themes to emerge from the conference, click here.  (Our thanks to Jonathan Auerbach for forwarding this report along.)

Expectations of higher highs on a given day have become so routine that I've suggested looking for small opportunities to short the E-Mini S&P in today's  tout. If done with care, we should be able to short a rising market all day, every day without an ounce of pain.

Dueling impulse legs on the weekly chart hint of more dithering for perhaps months to come. Even so, a dip to 377.95 would create a tempting buying opportunity, since that midpoint support is relatively isolated from the interference of prior lows. We'll make it our minimum downside objective for now, subject to negation by a pop above 433.99, the point 'C' of the pattern.

Price action has been so ratty lately that there's no percentage in guessing where this headless little rodent is going next.  However, since the presumption of higher prices has reached the point of near-certitude, we should probably focus for a change on downside opportunities. For starters I'll suggest jumping on any downtrend initiated on the 3-minute chart with an impulse leg shorter than four points and a single-bar C. The accompanying chart shows what I'm talking about. _______ UPDATE (12:30 p.m. EST): Good thing we went into today's decline thinking SMALL.  The Dow is off a whopping 18 points right now after being down as much as 60 points earlier in the session.  Makes one wonder, is that all there is?

Wednesday's report on crude oil inventories plucked the oil price like a guitar string.  The chart quieted down after tracing an ABC pattern which might allow us to get long a market that has been grinding higher for several weeks.  Traders should bid 81.34, just above the midpoint pivot, and, on the theory that the oil market has gotten its ya-ya's out for now, we will recommend a tighter stop than usual, at 81.23, for a hypothetical risk of $110 on the trade.  The sibling D target is not considered a buy, however, as it is just above an important prior low. (Posted by Doug McLagan) _______ UPDATE (10:29 a.m. EST):  The futures bottomed a penny beneath our bid, giving us a perfect entry price; then they shot up to 82.08, yielding a theoretical profit of as much as $740 on $110 of risk. They have been spasming wildly ever since, but by now you should be out with a nice profit in any case. 

The pattern shown in the chart is the one that caught my eye during yesterday's tutorial session. It has since developed and is even more compelling with respect to the opportunity it may present for bottom-fishing. This should be done at 1095.50, two ticks above the Hidden Pivot target shown, with a stop-loss at 1094.20. Pivoteers could also attempt entry via camouflage if and when the downtrend closely approaches the target.  Night owls intent on scalping should consider 1111.80 as a place to get short with a tight stop-loss. That is the sibling midpoint of the 1095.50 target, and it should now act as resistance. _______ UPDATE (10:25 a.m. EST):  The events of the day have unfolded so far as foreseen.  The overnight high was 1111.70, a dime from where shorts were advised, and the futures have since fallen as low as 1100.50.  The rally to the C-D midpoint has confirmed the 1095.50 target. 

Readers got pretty stirred up the other day after we published a think-piece by Sinophile Mario Cavolo asserting that the world would muddle through its financial crisis without experiencing a catastrophic collapse. Although we disagree and expect a one-two punch of deflation/hyperinflation to put the global economy and financial system into a deep coma for at least a few years, we’d have to concede that a more boring outcome is at least possible. As much might be inferred from the chart below, which shows price action in the Dow Industrials going back 20 years. The first thing to notice is that the Dow is currently trading near the exact middle of the last ten years’ powerful ups and downs. Not exactly horrific, considering the financial system is immersed in its deepest crisis since the Great Depression and the economy remains frozen. Referring to the chart, if you draw a horizontal line passing through as many price bars as possible during that period, it would just nip the top of yesterday’s high. In fact, the blue chip average has done absolutely nothing since the late 1990s if inflation is ignored. And if it is not ignored, you can see what a losing game the stock market has been for the average investor.  Could it have been just a few short years ago that investors told pollsters they expected to reap annual gains averaging 28 percent until the end of their days?  Warren Buffet probably wishes he’d done half that well over the last few years. Boring Resolution Unlikely Regarding the possibility of a boring resolution to America’s, and the world’s, towering debt problems, we think the odds are heavily against it. So egregious are the lies that currently sustain our economic system that muddling through seems quite impossible. Where the U.S.