December 2010

We're long 800 shares with a cost basis of 14.27 against eight January 34 puts that we bought for 0.77.  Let's reduce our premium exposure by shorting puts of a lower strike.  Accordingly, I'll recommend that you offer eight January 32 puts short for 0.72, good through Friday. They closed yesterday @ 0.46, but the stock would have to fall t around 36.40 to get us filled.

We hold four January 111 puts for 0.97 bought shortly after the opening on Wednesday.  The options were acquired not because the Diamonds were peaking at a Hidden Pivot target, but because they were starting to look tired. I am unable to project a downside target at the moment, other than a minor one at 114.59 (or 114.39 if any lower). That's a Hidden Pivot, and because its sibling midpoint at 114.87 has already been breached, it can serve as a minimum objective for now.

A short-squeeze rally in the opening hour failed by two ticks to exceed an 'external' peak from Tuesday, providing the evidence of gutlessness we needed to justify taking the rest of the day off.  It was all downhill from there, albeit not steeply enough to provide any special opportunities for shorts. The selling was labored, and when five hours of huffing and puffing was done, the intraday low and high were separated by just ten points.  Traders will find numerous downtrending abc's to look at Wednesday night, but the only one that I half-like will engender a midpoint support at 1229.25 -- too close to the intraday low to be worth much for trading purposes. For your information, its 'd' sibling lies at 1224.00.

Bullion prices seem likely to remain under pressure for the rest of the year now that Moody’s has trained its water hose on…Spain!  Yesterday, the ratings firm dithered its way into the headlines with a threat to downgrade Iberian debt.  Presumably, this was done at the behest of Geithner, Bernanke & Friends.  Regardless of who ordered the hit, it sufficed to touch off yet another headless-chicken scramble into the alleged “safety” of  the U.S. dollar. The timing of this conspiratorial boost to the buck suggests that the Plunge Protection Team is getting better at its job with each passing month. By our runes, the dollar was poised for a breakdown. Lo, just as the selloff begun on Monday was starting to snowball, the dollar whipped around and began a steep rally that was still in force at yesterday’s close.  If we’d stage-managed the turn ourselves using Hidden Pivots to time the announcement, we could not have picked a more opportune spot for Moody’s and its masters to spring a trap on dollar shorts. Curiously, although the threat did its job, turning a weak dollar lethal to anyone betting against it -- while of course knocking gold and silver futures for a loop -- Spain’s borrowing costs remained largely unchanged. Spanish bond yields actually ended the day lower, suggesting, as the Wall Street Journal put it, that “investors may have become immune to such warnings.”  Do lenders know something that the rating service does not?  At the very least, it would appear that they had the jump on Moody’s, since yields on 12- and 18-month bills issued by Spain had risen a full percentage point since mid-November. Dealing Off the Bottom From a technical standpoint the Dollar Index, currently trading around 80.24, will become an odds-on bet to hit a minimum 82.23

Just for the hell of it, let's try to buy four January 111 puts.  They closed @ 1.01, but I'll recommend bidding 0.97 for them at the opening. Stay tuned, since I may adjust the price. _______ UPDATE (9:53 a.m. ET):  We bought four puts for 0.97.  Do nothing further for now.

I've given "thumbs-down" to the E-Mini S&Ps, since it just spent two days failing to reach a very modest rally target. Even though I've suggested bottom-fishing on the way down, we should use the utmost caution, since this could be the beginning of a nasty plunge.

A Hidden Pivot at 1245.25 is equivalent to the one at 1250.25 that I gave here earlier for the December contract, and there should have been no problem achieving it.  The fact that there was a problem should command our attention and tilt our bias negative for now.  Night owls can nevertheless try bottom-fishing the 1228.00 target of the corrective pattern show, but you should pay close attention to price action at the 1232.75 midpoint, since a precise bounce would corroborate the 'd' target itself.

A midpoint support at 28.615 is equivalent to the one given in today's Gold tout, and it can serve as a minimum correction target for the next day or two.  A pop today above 30.000 would turn the short-term picture bullish, but 30.295 or higher would send bears scurrying and retrain our focus on the big-picture target at 32.285 given here yesterday.

We can use the 1378.70 midpoint shown in the chart as a minimum retracement target, since Gold seems to be having  difficulty sustaining altitude at the moment. Night owls can use the corrective pattern at the right edge of the chart to bottom-fish at 1390.10, the 'D' target of yesterday's histrionics. A two-tick stop-loss is what it's worth, since the downtrend has gone sloppily sideways early Tuesday night. The short-term picture would turn bullish again on a print today exceeding 1412.30. _______ UPDATE (1:48 a.m. ET): The pivot at 1390.10 evinced no support whatsoever, implying that the downtrend is bound for a minimum 1378.70.