December 2010

We found sufficient evidence of tiredness and timidity in the S&P futures to justify shorting the market speculatively, which we had already done in Rick’s Picks by buying Diamond puts. In Gold, we identified a midpoint support that subsequently provided a precisely tradable but short-lived bounce. Looking at T-Bond futures, we came up with a few more reasons to think that prices will continue to fall, and therefore interest rates to rise, in the weeks ahead. Copper and Crude looked bullish as all get-out, and we foresaw the possibility of an exhaustion spike in the latter that could take prices to as high $111 per barrel.

The dollar appears to be breaking down, as noted in today's tout for DXY. If so, it could provide some lift for gold and silver as the week progresses.

The Dollar Index has picked up support from some too-obvious lows made a week ago, but the damage was done earlier in yesterday's session when DXY crashed the 79.25 midpoint support of the pattern shown. This implies more slippage over the near term to at least 78.10, the midpoint's 'd' sibling.

Silver appears to be breaking free of the strong gravitational pull of the trendline I'd used to project a worst-case low for the correction begun a week ago. To align the forecast with the one out today for February Gold, we'll use the coordinates shown in the chart, stipulating that a two-day close above the 30.150 midpoint is needed before we infer that its sibling 32.285 'D' target has become an odds-on bet.

March Gold is doing this evening what it couldn't all day Monday: i.e., pushing above -- oops, make that spiking above, since the futures just popped $1.20 seconds ago -- an external peak at 1401.50 that I'd noted here previously.  In the same leap, they've breached a second "external" peak at 1405.40, suggesting the pressure will be on the bad guys overnight.  We should focus on a midpoint resistance at 1412.40, a slightly higher Hidden Pivot than the one given here yesterday. Its provenance is shown in the accompanying chart.  While a breach today would be constructive, we'll stipulate that the futures must close above 1412.40 for two consecutive days before we infer they're on their way to its 'D' sibling at 1452.60.

I've established a tracking position for your further guidance, since some subscribers are evidently still long.  Ahead of EK's leap, I'd touted the January 5 calls when they were offered for 0.26, so we'll assume four still held after cashing out of four more at 0.54 (that's midway between 0.26 and their so-far post-rally high of 0.83).   That gives us an effective cost basis of -0.02 for each of the four puts we still hold, so we'll just call them freebies.  FYI, the same pederasts who were accumulating stock for five weeks before They sprang a bear trap have been letting the stock fall back so that They can steal more of it from nervous widows and pensioners.  We'll do nothing further at the moment, since we've got at least 7-10 days to roll out of January premium before it starts to flatline. _______ UPDATE (2:27 p.m. ET):  EK is moving out of a consolidation, presumably bound for a minimum 5.82 once it has cleared the midpoint resistance at 5.44. _______ FURTHER UPDATE (December 20, 11:123a.m. ET):  Kodak has popped to a high today of 5.88. I'll suggest exiting two of the four Jan 5 calls that remain for  0.95 or better.  That will give us an adjusted cost basis of -0.97 for the two calls that remain.

Pretty amazing.  The futures had all night and a full day to rally just seven points to a Hidden Pivot target, and yet they somehow failed.  More amazing still is that they will likely continue higher in the days and weeks (months?) ahead despite mounting evidence that there is almost zero buying interest. This seeming paradox exists because short-covering is always lurking in the shadows to pop shares higher. It usually take a little news, any news, to trigger a squeeze, but yesterday there was no news whatsoever. (Granted, Brett Favre won't be starting tonight against the Giants, but we wouldn't have expected that story to move the markets.)  The 1250.25 target remains valid nonetheless, and you can try shorting there with a stop-loss as tight as 1.00 point.  However, it is a sign of incipient (and presumably short-lived) weakness that the futures died more than three points shy of an easy target.  The pattern with which it is associated is shown in the accompanying chart.

(The following essay by Cam Fitzgerald, an occasional contributor to Rick’s Picks, drew nearly three dozen responses since being posted Sunday evening, so we are letting it run for another day. Cam sees a world on the brink of financial, economic and political disaster. If the global economy and trade were to collapse – hardly a longshot bet at this point – he notes that there is no “Plan B.” We had better come up with one soon, says Cam, or we could all wind up wallowing in feudal darkness for decades. RA) The T-Bond market is groaning.  Like a great, creaking ship lurching to one side, the sounds of shifting portfolio positions have grown louder and more ominous by the hour, accompanied by the clamor of bailout pleas and a mad scramble for the life rafts. Rates are on the rise and prices falling. Bonds are dead, long live Bonds! The pirates off the stern, meanwhile, smell blood and are sizing up the opportunity to take down one of the fattest, easiest targets they have seen in all their sorry lives. They know they can take this craft down with words alone. If only they can spread fear above board and on the decks, they know the crew and its passengers will rush for safety, setting off a panic that sees all hands clinging to the rails on one side, capsizing the ship. But there are not enough life preservers! Blimey! It’s a salty, seafaring epic in the making. Meanwhile, back in the landlubber’s world there seem to be quite a few asset classes that are being stretched and distorted. Equities in domestic markets have virtually regained their pre-recession highs in the absence of any real buyers other than high-frequency computer traders. Most other investors, insiders, mutual funds and individuals

Silver was acting feisty shortly before midnight Sunday, but its rowdiness stopped short of challenging peaks from Thursday and Friday.  The bullish "trigger" lies still higher,so check out today's tout to see exactly what you should be rooting for.