July 2010

Yesterday's synthetic rally was 80% over by the opening bell, and once the session began it took sellers less than an hour to start piling on.  Yet again, however, we shouldn't count DaBoyz out, since there are obviously more than a few panicky shorts still alive. They'll get what they deserve for a second straight day if the futures should push above 1027.50, since that would refresh the bullish impulse on the 15-minute chart. More bullish still would be a move above 1031.50, the midpoint resistance of the pattern begun from yesterday's low. It projects as high as 1049.25.  If the futures should unexpectedly delight by falling, the key support lies at 1014.75, a midpoint pivot. _______ UPDATE (10:22 a.m. EDT):  DaBoyz have shorts by the scrotum once again, but their success has been limited and labored, since the futures have yet to pierce yesterday's high, 1038.50.  The 1049.25 target is very much in play, but I'd suggest keeping a close eye on the 1-minute chart nonetheless, shorting the first abc downtrend, since the squeeze is so noticeably lacking in power.

The futures breached a midpoint support by two cents, implying more weakness to come, but the surprisingly sharp reversal that followed looked more like Silver wanted to fly. A recalcitrant Gold appeared to restrain the impulse, however, and the September contract ended the day in a holding pattern that left it unchanged since last Thursday. On balance, my bias is negative for the short-term, with jeopardy down to as low as 17.160 if the futures should close below 17.635.  Alternatively, a thrust today exceeding 17.935 would offer the first hint of incipient strength.

The futures got whacked half as hard as they did last Thursday, putting in a shaky low just 80 cents above our 1188.70 target (a midpoint pivot).  Because the bounce so far has been feeble, however, we should be prepared for a further fall to at least 1162.30 if 1188.70 is breached decisively or if the futures closed beneath that number. Alternatively, and once again, buyers would need to pop the August contract above 1222.90 to put bulls back in command. ______ UPDATE (10:17 a.m. EDT):  Gold is struggling for altitude after bottoming overnight at 1185.00. That is bearish, but we'll use a close below 1188.70 as our bear trigger. In the meantime, it would only take a pop to 1198.50, just $3.10 above today's so-far recovery high, to turn the hourly chart bullish. ______ FURTHER UPDATE (1:28 p.m. EDT):  The pop above 1198.50 should be discounted, since it took several running starts to achieve. The move is impulsive on the hourly chart, but not very impressive.

[The exceedingly gloomy analysis of the Gulf oil-gusher that ran here yesterday elicited many interesting comments.  Generally speaking, and much to our surprise, readers did not reject the author's doomsday thesis out-of-hand. We are airing Erich Simon's article for a second day in the hope that it will generate further, enlightening discussion.  The environmental health of the planet may hang in the balance, as many seem to understand.  As of this moment, however, no one can say for certain that the "fix," a relief well due to be completed by August, will save the day for Mother Earth.  RA ] With U.S. military Insiders (BP shills in tow) now close enough to peer over the Continental Shelf, down the sloping, innocuous, white sandy overlay into millions of years of sediment covering who-knows-what, they are still unable to see further into the miles of drill casings inside the 'relief' bores – unable to look into the fiery bowels of a sleeping enemy whose size and power once unleashed can turn humans into frozen statues. Meanwhile, the latest qualitative, operational drivel continues to escape both sides of BP’s mouth. Here they are, the Masters of Deep-Earth Exhuming, standing mere feet across a line from their target, and nothing is slated until August under the auspices of a "delicate" operation. Is drilling into the side of a hundred million atomic bombs…delicate? After all, the reddish-black oil confluent pumping like smoke out of the sea floor bears a striking resemblance to Black Smokers, which are vents from volcanoes lurking beneath the ocean bottom, the deepest on record just adjacent to the Deepwater Horizon Disaster, in the Caribbean. Meanwhile, while the military/BP contingent sits around scratching its behind in frozen inaction and awe of forces beyond their comprehension, weather conditions are only to get worse, much worse, with hurricane season already moving in, and with the Deepwater Horizon Chernobyl continuing to gush toxic oil and gas from more and

Newmont suffered damage equal to that of gold futures as a result of last Thursday's downdraft, and the stock will now need to hold above 57.59, a midpoint support, if it is to avoid diving down its 'd' sibling at 55.42.  Alternatively, a print at 60.75 over the next day or two is where the very lesser charts would begin to look bullish once again.

Friday's low at 17.635 was the precise midpoint of the bearish pattern shown in the chart, so if it's breached we should infer that more downside to its 'd' sibling, 17.160, is coming. Alternatively, any rally that would turn the hourly chart bullish right now is too much to expect, so let's lower the bar to 18.815 -- precisely where the ten-minute chart would generate a promising, bullish impulse leg.

We continue to hold two August 98 puts for 1.06 and four July 96 puts for 0.70. Time decay is going to be start devouring our July puts this week, but we'll give them perhaps one more day, since the 95.42 downside target in the underlying vehicle is still valid, and because I utterly lack the imagination to see how the Diamonds and E-Minis could possibly rally before they reach my bearish targets.  Granted, tonight's obligatory, beginning-of-the-week short squeeze has reversed the Mini-S&P's miseries by 16 points -- the equivalent of a 130-point rally in the Dow -- but I have my doubts there will be many more bears left to squeeze by the time the opening bell sounds on Tuesday morning.

Bulls have yet to show any signs of life, and if they don't pick up the tempo this morning, we'll soon be seeing a test of a midpoint support at 1188.70. That Hidden Pivot is tied to an 1162.30 target, so a robust bounce is crucial to the short-term picture -- and perhaps the intermediate-term one as well.  Alternatively, 1222.90 is still the number to beat, since that's what it would take at a minimum to turn the lesser intraday charts bullish.  Night owls can look for signs of support at 1206.50 if 1210.10 is not exceeded to the upside first, but I wouldn't lean on it too hard for bottom-fishing, since it looks fragile. _______ UPDATE (11:27 a.m. EDT):  A wave of selling overnight has brought the futures down to within 80 cents of the 1188.70 support flagged above. It must hold or a further decline of $26 will ensue.

The futures have been down as much as nine points in subdued trading Monday evening, carving out a low beneath the would-be support of last Thursday's bottom, 1006.00. Still, sellers have shown themselves to be so gutless lately that we shouldn't count on any more of a reality check than our toothsome 992.50 target would seem to allow. The target has been advertised for long enough that I wouldn't suggest trying to bottom-fish with the usual nickel-and-dime stop-loss.  Instead, traders keen to catch a possible swing low should start looking for a camouflaged turn on the 3- or 5-minute chart once the futures reach 994.50 or so on the way down.  If sellers should surprise by overshooting 992.50 by more than a 1.25 points on first contact, take it as a sign that there is significant weakness remaining to be spent over the near term. _______ UPDATE (3:08 p.m. EDT):  We stood pat, enduring a short-squeeze that was equivalent to a DJIA thrust of about 280 points.  The broad averages have since plummeted back to unchanged, and now, assuming any shorts who had survived until yesterday have been gutted, disemboweled and purged, we can perhaps look forward to a resumption of the righteous and redemptive weakness inaugurated by the flash crash two months ago.