December 2010

We’re long 800 shares with a cost basis of 14.27 against eight January 34 puts held for 0.77.  Offer the puts to close for 0.43, but raise the offer to 0.49 if the stock is trading 38.25 or lower.  These puts are criminally manipulated, as far as I can tell, so I'll further recommend that you pull the order if it hasn't been filled within ten minutes of the opening bell. _______ UPDATE: We did nothing, since the puts traded no higher than 0.35.  Stay tuned, since we may try again later in the week or early next. _______FURTHER UPDATE (3:21 p.m. ET): In the chat room, I've recommended closing out the puts for 0.38, good for the remainder of the day.  (Closing note for Thursday:  The puts were 0.38 bid in the final minutes of the session, so I'll consider the order filled. They gave us protection when SLW was falling hard but have since outlived their usefulness. The 0.38 these options cost us will be added to our stock price, giving us a new basis of 14.65.  The next time we short into a spike, we'll use call options, not puts.)

Yesterday's surge was not quite as compelling as the one in Silver, but it'll do, since it generated a bullish impulse leg on the hourly chart (a camouflaged one, by the way, since it left unbreached an in-your-face high at 1408.90 recorded on December 14). The rally also sustained altitude above the 1401.90 Hidden Pivot midpoint of a pattern that projects to 1442.10 (A=1352.00 on November 26).  As recommended in Silver, belated entries should be attempted via camouflage on a pullback to 1401.90. To broaden the possibilities, I suggest using the 30-minute chart to create some look-to-the-left peaks along the path of the steep decline on December 7-8.  This is shown in the chart. _______ UPDATE (noon):  The 1401.90 midpoint support flagged above came within four ticks of nailing the low of a very tradable, $13 bounce. If you got long at the bottom, partial-profit taking is advised, since the futures are currently trading near the upper threshold of today's move.  As in Silver, multi-contract longs should save a contract or two for a potential home run.

March Silver did all we asked of it yesterday and more, vaporizing any and all scuzzballs with the bad sense to resist the trend. The rally projects to at least 32.285, a Hidden Pivot target tied to a 30.150 midpoint resistance that looks to have been a pushover. If you got on board using the pattern sketched here yesterday, the ride would have been trouble-free from the time of entry, since Silver never looked back after tripping the entry signal at 29.480 around 5 a.m. ET.  If you are looking for a belated entry opportunity, use a pullback to 30.150 and a camouflage signal. _______ UPDATE 12:58 a.m. ET):  The belated entry opportunity we'd sought came with perfect precision when the futures bottomed at 30.145 shortly after 8 p.m. Eastern.  A 30-cent rally has ensued, worth a theoretical $1500 gain per contract to anyone who rode the surge to this evening's so-far high, 30.445.  Partial-profit taking is in order, but you should save a contract or two for a potential home run.

(The essay below has coaxed forth quite a response.  We urge you to jump into the discussion with your own thoughts.  RA)  Interviewed by Fox’s Chris Wallace recently, Senator Tom Coburn (R-Oklahoma) made quite a splash in the news, warning that America could suffer “Apocalyptic pain” within the next few years if it doesn’t get debt under control. Coburn’s heart seems to be in the right place, since he is one of the most vocal members of Congress in railing against bailouts that have pushed public debt into the cosmos. But we wonder whether he isn’t a few steps behind the real world in worrying that our standard of living will plunge if America’s budget deficit is allowed to grow.  For in fact, the standard of living has been plunging for several years, to the extent that the middle class can no longer afford health care; that even households with two professional incomes must hock the ranch to put their kids through college; and that Baby Boomers’ retirement plans are either being pushed back by five or ten years or postponed indefinitely. Moreover, for the broad middle class, the situation is likely to grow even worse in the years ahead as strapped cities and towns are forced to raise taxes to cover fixed expenses – especially pension and health care benefits for public employees -- that are difficult or impossible to shrink. Add in the fact that real estate valuations from coast to coast are due to be reassessed downward for at least the next few years, and you begin to see why the deflation that holds the economy in a death grip cannot be loosened no matter what countermeasures are employed. Sen. Coburn says that the U.S. has just three or four years to get its fiscal house in order before

In trading early Monday evening, March Silver has taken an impulsive leap that looks powerful enough to coax a recalcitrant Gold higher. The chart accompanying Silver shows how a potential camouflage opportunity could develop as the evening progresses.

We've analyzed the T-Bond bear market closely during the Wednesday tutorial sessions, but here's a picture for the tout section that can be archived. Because there is such clarity in the 117^22 target and the daily-chart pattern that produced it, we should confidently expect more weakness down to at least 117^22. Also, any rally to the midpoint pivot, 122^27, should be regarded as an opportunity to try shorting with a tight stop-loss. ________ UPDATE:  On second thought, we'll pass on any opportunities that may arise to short 122^27, since it's possibility such relative heights could be achieved simultaneously with the creation of a powerful impulse leg on the intraday charts.

Silver has taken an encouraging leap early Monday evening after spending most of the day screwing the pooch. The move is nicely impulsive as well -- and possibly even camouflage-worthy, since the peak of the thrust failed by two ticks to exceed a presumably well-watched peak at 29.485 recorded last Wednesday.

A 1396.30 benchmark that we used yesterday can continue to serve as an alert if bulls should turn serious.  This seems unlikely in the absence of news to drive the metals market, but stranger things have happened.  Alternatively, a midpoint support on the hourly chart at 1369.30 can be used as a downside objective if gold gets sacked, but it is too murky to use for tightly stopped bottom-fishing.

The slowest trading day of 2010 produced intraday charts for this vehicle that look like a bowling ball's EKG.  We'd anticipated this in the weekly tutorial session and expect more of the same as the week wears on.  That said, the upward drift produced an impulse leg on the hourly chart that might prove to be exploitable if it traces out a correction similar to the one shown. Camouflage artistes should make certain that any such pullback meets all of our rules, including being equal, at least, to 0.618 of the k-A segment.