January 2011

We were hoping a bell would ring to signal a decisive end to the Mother of All Bear Rallies, now in its 22nd month, but it looks like we’ll have to settle for the next best indicator of The Top -- namely, Facebook’s IPO, prospectively the hottest ticket on Wall Street since Time-Warner merged with America Online. Who would have believed, in these harrowing economic times, that investors would practically trample each other for a chance to buy shares in the Web’s version of the Brooklyn Bridge?  That, evidently, is what the Street’s glib promoters have in mind when Facebook's IPO eventually happens: a buying stampede that will make Google’s initial public offering in 2004 seem as subdued as a PTA bake sale. However, there are so many sharks circling this deal that even if it raises the $55 billion or more that is expected, it will be just chum floating on the tide. Meanwhile, with no IPO even scheduled yet, how enthusiastic are investors? Extremely. A poker buddy of ours who attended a NYC investment banker’s sales pitch on Facebook the other day returned to Colorado with the religious fervor of someone who’d been to the Sermon on the Mount. Because the IPO is unlikely to materialize before 2012, however, that could make it difficult to determine exactly when the hubris on Wall Street is peaking, setting stocks up for The Big One we've all known is coming.  If and when the IPO happens, you can bet that the public offering being hatched by Facebook’s Machiavellian founder, Mark Zuckerberg, and the Svengalis at Goldman Sachs will be the Last Big Deal of this era. Goldman stands to reap a fortune if the IPO comes off as expected – an awesome feat, considering it will have been achieved when the U.S. economy was deleveraging more

Bullish impulse legs have gone nowhere, but we'll have to wait and see whether bearish ones start reaching their 'd' targets on the hourly chart. That would happen today if the futures print down to 29.340, just 6.5 cents beneath Wednesday night's so-far low.  It would take a bit worse than that, however -- specifically a print at 29.320 -- to refresh the bearish impulse on the hourly chart. ______ UPDATE (10:48 a.m. ET):  The futures fell to 29.155 overnight, and that is not a healthy sign for the near term, notwithstanding the gratuitous spasm that briefly took it 60 cents higher as the day session began.  Bulls would need to hit 29.995 today to re-energize the uptrend begun last Friday from 28.325.

A Hidden Pivot target at 1391.30 is still my minimum upside objective for the near term, although the ascent to it has been untradable for anyone managing risk methodically. The price action has been dispiriting, especially with weakness in the dollar as a backdrop. A pop today to 1397.60 would be reason to take encouragement, although nothing to get excited about. I still see price action in Gold as a lazy consolidation, but a dip below 1352.00 would be reason for concern. _______ UPDATE (10:43 a.m. ET): The futures made it to 1392.90 overnight before falling back $13 in their accustomed fashion. If the familiar pattern holds, they'll be buoyant for the rest of the day, but not buoyant enough to reach new recovery highs.

HOLY SMOKE!!  It appears that a Hidden Pivot target that took 14 weeks (!!) to reach is about to be eroded away in the space of just two days.  Since I'd advised tying our two February 310 puts to a break-even stop-loss, you might have covered them as early as Tuesday when they relapsed to 2.79; but in any event no lower than  2.65, Wednesday's opening price.  Although a profit was possible for the nimble, the maximum loss on the position would have been $44 plus commissions.  Apple would now appear bound for a minimum 383.50, pending a two-day close above 344.61.  (Use the daily chart, where A=235.56 on August 27.) I received an e-mail from a subscriber who apparently made money on the initial trade, but he couldn’t have made much, and the position may have turned into a loser if he was busy patting himself on the back as Apple began to climb yesterday.  He wrote as follows:  “I shorted AAPL stock at your ‘D’ and unlike the folks who today have been raped by the option floor, I’m looking at a very nice profit. Another great pick.”  Here’s my reply:  “Hope you were able to cover some of the position on the dip, since there’s always the chance we’ve been premature in anticipating the Mother of All Tops – especially in the shares of a company that will be raking in money by the zillions, one measly iTune dollar at a time, even if the economy sinks into Depression.  This aspect  of Apple’s business model is the retail world’s equivalent of nickel slot machines.”

Early Thursday morning, a tortuous climb presumably devoid of buying other than short-covering by a few nervous Nellies, has gotten within a single point of the 1285.25 rally target flagged here. It is still valid -- and still short-able with a 1286.25 stop-loss -- although the odds of a quick and easy profit may favor night owls, since pent-up shorts could make quick work of the hidden resistance on an opening gap.  If you've made money on the long side of this well anticipated rally, you can widen the stop to two points. ______ UPDATE (10:30 a.m. ET): For whatever reason -- sabotage by Goldman Sachs? Boris Putin? Sarah Palin? -- the futures have stalled at exactly 1284.50, three ticks from our target. Since a 7-point pullback has ensued, the "No Sloppy Seconds Rule" applies, and I am therefore recommending that you cancel the order.

Of course I was exaggerating when I said that nothing could stop this Bear Rally from Hell.  Obivously, something eventually will, but we should have learned by now not to expect too much whenever we attempt to impede Mad Money with a modest short offer.  We've also learned that we can do this as often as we damned well please -- the short in AAPL being the most recent example -- without Mr. Market ever laying a glove on us.  Using Hidden Pivot targets, we also have the ability to trade each rally from the long side, cursing it all the way to the bank.

Because several of the vehicles that Rick’s Picks trades and forecasts actively were approaching imnportant inflection points, we spent most of the session identifying possible trade set-ups. Woeking mainly with hourly charts, we located precise spots to get short in the Mini-S&P, the Mini-Dow and the Diamonds (by way of buying February 115 puts). Gold and Silver were in no hurry to go either up or down, but a close analysis revealed why, amidst the most serious correction in months, our bias should be moderately bullish.

It appears that nothing -- let me repeat that word: n-o-t-h-i-ng -- can hold this little sonofabitch down for long.  As I have pointed out many times, this is mainly because, insiders aside, there are no sellers.  With institutional bias on bullish autopilot via algorithmic trading, we shouldn't get our bearish hopes too high every time stocks falter. The S&Ps did so again recently by narrowly failing to achieve a 1278.75 target, but the comeuppance has been mild and the correction shallow. Accordingly, we must adjust our sights higher, since the most compelling pattern on the hourly chart implies the futures will hit 1285.25 on the next leap.  The HP midpoint associated with that target is 1271.50, but there is already too much chop in the vicinity of that number to create an easy opportunity for camoflageurs. The consolation prize for (eternally) patient, vigilant bears, is that the 1285.25 target is short-able with a 1.00-point stop-loss.

A bullish projection for Silver is becoming reality as I write these words, since the futures popped through an important short-term hidden resistance as I was putting the finishing touches on Tuesday's tout.  Night owls should look for a camouflage entry opportunity, since there is very nearly some on the hourly chart.