June 2010

The futures tried all day to get past our Hidden Pivot target at 1115.75, but in the end 1114.75 was the best they could muster.  A smidgen of short-squeeze could change that today, but the rally would not become nettlesome unless it exceeds a prior peak at 1118.00 that is shown in the chat. This is equivalent to a resistance noted in today's DIA tout, and it is shown in the accompanying chart.

(Editor’s note: From the perspective of Western nations, workers in China and India toil under miserable conditions for slave wages. Things are not quite as bad as that, says Shanghai correspondent and frequent Rick’s Picks contributor Mario Cavolo, and conditions can only continue to improve.  In the essay below, drawing on his own experience as a cruise-ship worker, he explains why. RA) It is no secret that Europe and America were built on slave labor. As the appalling details of Foxconn, Apple Computer's (NASDAQ: AAPL) supplier, have recently made clear, China and India are being built on slave labor’s modern equivalent. The details of the story vary,  but in the end, human beings work 12-16 hour days, six to seven days per week. They are given a place to sleep at night, a place to occasionally wash, three basic meals per day and no wage or a very low wage, such as today's equivalent of $6 per day. If a worker gets sick, his or her medical expenses are typically paid for.  Before we continue, think about that wage for a moment: $6 per day. Let's switch gears for a moment, considering the case of a well-established, international industry where people also work like slaves for 12 hours per day, seven days per week. What industry am I referring to? The cruise-ship vacation industry. However, there is an enormous difference between the intense labor demands of cruise-ship workers and factory workers in China or India – namely, the monthly wage. A typical kitchen crew-member is hired from the Philippines or Central America. With more and more ships sailing Asian waters, more and more Chinese are filling these jobs. As part of a cruise ship's hotel operation, they will work, on a contractual basis, 12 to 16 hours per day, seven days

We weathered a lot of kicking, screaming and flailing yesterday, but in the end, buying by Larry Kudlow alone proved insufficient to move the E-Mini S&P futures above a Hidden Pivot resistance at 1115.75 that was drum-rolled in yesterday's tout.  The fact that there were evidently no real sellers around was undoubtedly a plus for Larry, but he'll need the help of panicky bears if this lead balloon is to waft higher, as it might. In the meantime, we can use an "external" peak at 105.23 (May 19) to warn us when the pit bulls have begun to pose a minor threat to our peace of mind, if not to our hunch that a collapse looms.  We continue to hold four July 96 puts for 0.70. _______ UPDATE (June 18):  Two days of what passes for "action," and the Diamonds have yet to go any higher than 104.84.  They are getting heavy, for sure, but don't count DaBoyz out yet, since they have been able to sustain altitude while biding their time ahead of the next short-squeeze opportunity.

Sometimes we can learn more on do-nothing days than on days when the markets are hyperactive. Both Gold and the E-Mini S&Ps were in a wallow on this particular morning, and it allowed us to discover reasons why we should temporarily avoid trading either vehicle. We also considered the recent, spectacular move in coffee futures, focusing on some of the reasons why we should assiduously avoid entanglements with the gunslingers who trade this commodity. Finally, we looked a Silver Wheaton and decided that, for this stock, at least, all is right with the world.

I linked two frightening article here yesterday, one of which was written by an organic chemist who said the Gulf gusher was producing large amounts of methane and other toxic gases.  The full article can be accessed by clicking here.   (The other discussed the dire implications of a fractured sea bed.)  Since I am trying to confirm all such stories independently, I sought comment from a friend's son, a PhD candidate at Caltech who teaches in the chemistry department.  Here is what he had to say: "I took a look at the links.  I should preface my statements by saying that my training does not provide me any knowledge in the area of underwater oil drilling.  As someone who works in science, however, there were many aspects of the articles in those links that seemed suspicious.  It seemed a bit conspiracy theoryish, alarmist, and suggestive of pseudoscience.  Many statements are simply made, without any attempt at justification via scientific evidence.  I can tell you that some of the chemistry-related statements in the first article were flat out wrong, and this makes me suspicious of the rest of it.  "The second article states that there is some massive attempt to conceal the truth about the nature of the leak, but it is unclear to me that this would even be advantageous to the supposed perpetrators of such an act, or that it would even be feasible given the number of people involved and the attention the situation has been given.  The note directly after the second article talks about the government's campaign against them is about as conspiracy theory as you can get.  "In summary, I would not trust any statements made in these articles one way or another.  Unfortunately, I don't know anyone at Caltech that knows about this topic.  Good luck with the

An alternative rally target that I put out yesterday for the E-Mini S&Ps left about four points of upside for them above yesterday's high. The obligatory night-time squeeze may make the target moot, but at the moment (i.e., 9 p.m. EDT), DaBoyz were taking the futures lower, presumably to get some running room.

We talked of shorting Goldman for a possible ride down to 122.25, and this rally might provide a good opportunity to do it.  It projects to 138.71, so let's offer 200 shares short at 138.65, stop 138.95, day order.  You can substitute options, but the stop-loss will still apply. ______ UPDATE:  Before diving $1.50, Goldman topped at 138.26 -- not quite high enough to get us short. Cancel the trade, but keep in mind that the very bearish target remains in force if you want to take the initiative.

Gold is caught up in several uptrends of different degree, the largest of which promises to deliver 1340.10 (daily chart, A=940.06 on August 17, 2009).  More immediately, however (and also visible on the daily chart)  is a bullish pattern projecting to 1272.60 that is subject to midpoint interference at 1244.40. A two-day close above that Hidden Pivot is needed to make the push to 1272.60 an odds-on bet, but we can still look to board at these levels by hunting for camouflage intraday. If a fetching opportunity to do so  should arise, I may convene an impromptu webinar (announced in the chat room)  as I did yesterday to show you the easiest way aboard.

Silver kept the bull trend robustly alive with a spike yesterday that slightly exceeded a look-to-the-left peak at 18.585 recorded on June 1. The overshoot was just 3.5 cents, but that's plenty enough to suggest that more upside awaits following tonight's so-far gentle consolidation.  A more daunting peak at 18.815 will be today's challenge, but the futures looked to be in good shape to take it on as of around 8:25 p.m. EDT. A surge from here above $19 would provide a psychological boost as well, since it would badly compromise an all-too-clear head-and-shoulders pattern visible on the intraday charts.