January 2011

What would a trading session be without the obligatory swoon that so often separates night and day moods in this vehicle?  The recovery phase did not quite reach my target at 1391.30, but it remains valid nonetheless. Incidentally, and for your information, the first push above a midpoint resistance I'd flagged at 1378.20 occurred at 2:45 a.m. ET, and it yielded a camouflage entry that spiked to 1382.40 in the space of a few minutes.  This is shown in the chart.

We bought two February 310 puts yesterday for 2.85 when Apple opened on a gap to 344.49, just 12 cents from a well-advertised Hidden Pivot. Was this the last gasp of an intermediate-term rally that has seen the stock rise by $23?  We should know soon, but for now tie the puts to a break-even stop-loss, making it one-cancels-other with another order, good indefinitely, to short two February 300 puts for 2.85.  If filled, we will have legged into a theoretically riskless, vertical bear spread with profit potential of as much as $2000 if the stock falls hard.

We’ve shied away from the Arizona shooting because we didn’t want to open a can of worms in the Rick’s Picks forum.  However, because the tragic rampage at a Tucson political gathering has completely dominated the news since Saturday, when it occurred, and because the shockwaves are likely to reverberate for weeks, months or even years, we’ll say a few words and leave it at that. We were initially surprised that a news story about a nut with a gun who murders six people at a political forum and seriously injures 14 others could take flight the way this story has. With all the fatal shootings that have occurred in recent years -- in schools and office buildings, at social gatherings, religious enclaves, Army bases, post offices, college campuses and elsewhere-- we’d have thought Americans had grown inured to news of yet another murderous spree. What’s different about this spree, apparently, is that its purpose, if indeed there was one, has been conflated with the angry political mood over President Obama’s attempt to radically remake the nation’s health care system. One might have thought the political furies had spent themselves when Obamacare slashed and burned its way through Congress last year in search of votes. But with mounting threats to dismantle the legislation piece-by-piece starting to gel, perhaps it was inevitable that those who have supported Obamacare all along would unleash a new round of salvos at those who would deign to challenge it.  In fact,  the barrage they’ve launched is more like an A-bomb in that it would risk damaging the entire social and legal infrastructure of free speech in order to silence Obamacare’s most strident critics.  Redneck, or Zen One of them, as we know, is Sarah Palin, and it is upon her that the political left has trained

We'll come to our  desks Tuesday morning looking for a potentially tradable head-fake in the E-Mini S&P.  The broad averages may not be collapsing, but it's been enjoyable nonetheless to see them floundering after January 3's media-pleasing Midway act.

After three weeks of gratuitous delays, the euro has resumed its predicted collapse with a vengeance. A whiff of Spain's predicament, perhaps?  No matter.  My downside target for the March contract is 1.2689 (Note: This has been corrected upward), and you can plan on bottom-fishing near there with a 1.2692 bid, stop 1.2682. _____ UPDATE (January 13): This week's short squeeze may look impressive on the 5-minute chart, but it would need to hit  1.3494 to negate our bearish target.  Meanwhile, there's plenty of camouflage cover for a bull trade using Wednesday's 1.3142 high as an impulsive point 'B'. (Late note:  The camouflage set-up, with single-bar coordinates at B-C, worked nicely, signaling a long entry just ahead of an extremely powerful, 2.5-cent rally.)  _______ FURTHER UPDATE (January 18):  The futures have rallied ferociously, apparently because German paper has been enjoying strong demand. It would take a print above 1.3493 to invalidate my bearish targets, but at this point it looks likely. Accordingly, any camouflaged scalp- or swing-trading should be done from the long side.

The futures have been screwing the pooch for a week and a day, unable to rally but equally unable to sell off.  My immediate bias remains bearish nonetheless, and cautious in a bigger way, because of the futures' recent failure, by 1.75 points, to reach a modest rally target at 1278.75. The key number for Monday night and early Tuesday -- insignificant in any context larger than that -- is 1268.50, the Hidden Pivot midpoint of the pattern shown. A decisive penetration would portend more upside to 1279.00 -- a high that would be marginally above the one created last Thursday.  Since a stall at that height after an ostensible breakout could be the start of something nasty, I would strongly recommend trying to board the first southbound abc pattern thereafter on the very lesser charts.

A rally pattern similar to the one we're using in February Gold points to 29.615, although its associative midpoint at 29.105 has already been breached, shortening the odds of a thrust to the target. Alternatively, a close today beneath 28.735 would augur more downside to at least 28.100.

The futures didn't quite make it to our bullish trigger price at 1377.80 yesterday, but neither have they done much to give the bad guys something to crow about.  My immediate bias is bullish, predicated once again on a decisive move above a midpoint resistance that has migrated higher, to 1378.20.  The 'd' target associated with it is 1391.30, the most compelling rally target we have for now.

(Our good friend Doug B., The World’s Smartest Financial Advisor as far as we’re concerned, is still bullish as all get-out on muni bonds, notwithstanding the swipe we took at them last week in a commentary entitled “Muni Bond Yields Are Pumped for a Reason.” Doug says a perfect storm of bad news brought bond prices down to levels where an investor would have to have been crazy to pass them up. He also thinks fears of widespread defaults by strapped cities are overblown. For some outside-of-the-box thinking, read his aggressively contrarian commentary below -- and then, dear forum readers, if you disagree, don't pull your punches.  Oh, and one more thing: Before you start reading, click here to sign up for January 18's free demonstration, "A Hidden Pivot Analysis of Two Promising Stocks for 2011.) “I want to clarify a few things for you and your readers about my Muni Bond Buy. First, I am buying garden variety leveraged closed-end muni funds, managed mostly by Blackrock, Invesco/VanKampen and Nuveen. The funds contain mostly (85% plus) investment grade long term issues and the 7.5% yields are a function of leverage and modest (4-6%) discounts to NAV. They contain everything from GOs, Revs, Escrowed, tobacco, hospital, etc. I am placing some measure of confidence on the credit analysis capabilities of the managers. But the motivation for the purchase was not some big macro optimism on municipal balance sheet repair. It was because these funds got crushed overnight in November when it became clear that a flood of new supply was going to be crammed into year-end due to the likelihood that the Build America Bond Program would not be renewed for 2011 following the Republican landslide. The specter of huge supply ran straight into the most negative sentiment for bonds in years. Along with the