March 2011

We hold a single February 57 put which owing to earlier profit-taking can do no worse than make us $12.  In fact, our paper gain is currently $124 with the put valued at 1.12.  We'll continue to hold this position, oblivious to the ups and downs of the QQQs, since we've earned the right to think we may finally have precisely caught the Mother of All Bear Rally Tops.  If you are a new subscriber who took this trade for cheap thrills, offer the put for $350 -- the price of a year's subscription -- good till canceled. From a technical standpoint Da Cubes look southbound to a minimum 56.63.  That's a Hidden Pivot midpoint, and if it's breached on a closing basis more weakness over the near term to as low as 55.21 would be implied.

Yesterday’s newsworthy satisfactions were marred only by the passage of a spending bill that unfortunately will allow the U.S. Government to avoid shutting down.  Putting aside this disappointment, which was not unexpected, all seemed right with the world: stocks got bitch-slapped for a change, bullion prices screamed, Charlie Sheen and Col. Qadaffy appeared headed for well-deserved oblivion (Sheen could conceivably fare better than his Libyan counterpart, since there will be no Kadhafi reruns), and winter temperatures here in Boulder, Colorado, hovered near the mid-60s. What more could one have asked?  Actually, our perfect day would have doubled or even tripled the Dow’s 168-point decline, since every significant selloff helps bring America closer to the day when investors and the world-at-large forsake the matrix of lies, delusions and hubris that have made true economic recovery all but impossible.  Alas, the spinmeisters and news media, if not the rest of us, continue to cling to the Bernanke narrative that the economy is returning to health, albeit very slowly. That’s despite deflation in the real estate sector so severe and prolonged that even optimists no longer regard it as cyclical; soaring food and energy prices; and budget crises at all levels of government that will ultimately push unemployment to heights not seen since the 1930s. Under the circumstances, you can hardly blame us for betting against every stock-market rally. We’ve been doing this reflexively for months: getting short at each minor Hidden Pivot rally target in expectations that one of them will prove to be The Top – the whimpering end of the Granddaddy of All Short Squeezes launched almost exactly two years ago.  Locking in Gains  Our strategy has benefited from consistent (although not necessarily repeatable) success at predicting tradable tops, even if none has proved particularly enduring. A week ago, for instance, Rick’s Picks

There are plenty of big-picture targets way above, so we should focus our attention on lesser patterns capable of getting us long with relatively little risk.  The five-minute chart is where you want to be if you are scalp-trading or perhaps looking to establish a longer-term position.  As of around 9:45 p.m. EST, there was an attractive camouflage opportunity developing in the form of a solid impulse leg that ostentatiously failed to take out Monday's highs. Night owls, pivoteers and camouflageurs should take note in case the pattern develops as shown. ________ UPDATE (9:21 a.m. EST): A distinctive, single-bar 'C' formed at 10:35 p.m. EST, yielding an entry price at 33.875 and a minor-trend target at 33.980. If you held onto any contracts above it, you could have ridden the rally 50 cents higher, to a so-far intraday top at 34.485.

Newmont Mining has a ways to fall before the stink bid I've suggested would come into play, but you should set an alert nonetheless, since the corrective pattern from which the target was extrapolated is compelling.

April Gold spent every blissful moment of yesterday's session screwing the pooch, but if the futures should turn even slightly serious today, look for a thrust to 1422.10.  The 'p' midpoint associated with that minor target lies at 1413.70, suggesting that night owls might be able to extract a bullish camouflage opportunity from any teeter-tottering that occurs around that number.  The five-minute chart reproduced alongside shows two micro-peaks that look well suited for that purpose. _______ UPDATE (9:33 a.m. EST):  A subtle but potent leg formed around 12:20 a.m. EST with a pop to 1414.20 followed by a 1413.40 'C' low that generated a 1413.80 'X' entry. The initial rally got to 1415.90, but a subsequent pattern with an ostensibly "failed" point 'B' high at 1416.50 (failed because  it tied an important peak recorded on Monday) generated a new entry signal with a 1418.60 target and a shot at the eventual overnight high, 1423.90.

The AB impulse leg shown is pure sausage, since it failed to exceed the 54.30 low recorded last July, but the pattern is so pretty otherwise that we can, and should, use it to attempt bottom-fishing in this stock.  It's been quite a while since we held a position in Newmont, but attempting to establish one at the 'D' correction target shown would appear to be a very low-risk gambit.  Accordingly, I'll recommend buying 400 shares with a 50.40 bid, good-till-canceled.  I've also set a screen alert at 52.28, since that secondary retracement target could engender a tradable turn. _____ UPDATE:  Odds of our stealing the stock diminished with yesterday's breakaway gap, but well leave the bid in anyway, just in case.  _______ UPDATE (Thursday, March 3, 12:03 p.m. EST):  NEM is getting savaged today, pushing it closer to our 50.40 stink bid.  Regarding the lesser HP support at 52.28, you can test the water there with a 400-share bid, but I'd suggest doing so only if you are using camouflage to limit risk to literal nickels and dimes.  If you are unable to do this, try a 52.30 bid, stop 52.18.  FYI, the shakedown has obliterated the 53.41 midpoint support associated with A=60.19, D=50.35.  Because there are several patterns that project to within a a nickel of 50.40, odds favor a correction to that level. If so,, the pullback from October's highs will have amounted to an unexceptional 15%.  ________ UPDATE:  We just missed, Newmont having launched sharply higher after pulling back to 52.69.

So feeble were buyers yesterday that DaBoyz couldn't even short-squeeze this vehicle above the 1334.75 threshold where I'd said the rally would turn lethal for bears.  They'll have another chance today, though, since sellers have been even more feeble resisting an uptrend that has been all waft and no thrust.  The nearest Hidden Pivot lies at 1334.25, just shy of our trigger level, but I wouldn't count on it for stopping power.  In any event, we'll want to short an old target at 1356.00 if and when the futures get there, since th target (shown in the chart) remains valid. Pivoteers may notice a pair of purple coordinates that define yet another bullish possibility. Their D target is 1373.25, and so a stall at the associative midpoint, 1333.00, could have predictive value.

We've already taken a partial profit on a short position initiated an inch off yesterday's high, so there is little risk even if the broad averages head higher (as they always seem to do).  Adjusted for the theoretical gain of 0.18 per contract that we realized by selling two March 57 puts intraday for 0.80,  our two remaining puts have a cost basis of 0.44. For now, plan on stopping yourself out if they touch 0.50, a price that would leave us with no actual loss even after commissions.  If the Cubes do get second wind and pop above yesterday's high, we'll plan on re-shorting the little s.o.b. at 60.36 by buying four April 60 monthly puts. (They settled yesterday at 2.76.)  The target pattern, clear as day on the weekly chart, is shown in the inset.  _______ UPDATE (10:37 a.m. EST):  The sneaky little s.o.b. head-faked on an opening-bar gap to 58.02, but the puts went no lower than 0.55, so we remain long two of them.  Close out one, good-till-canceled, if they should touch 1.00. If successful, we'll own a free put (or multiple thereof, depending on how many puts you bought initially) with zero risk. _______FURTHER UPDATE: The puts hit 1.00 around 1:30 p.m. and have since slid back to 0.94 after topping at 1.02.  We now have a single contract remaining for each set of four originally purchased. The profit-adjusted cost basis of our position amounts to a 0.12 CREDIT, implying a $12 gain and no loss possible even after adjusting for commissions.  We'll simply forget about this one until it's time to roll into the April contract, assuming we get the chance. In the exaggeration-prone and oft-disingenuous world of direct mail marketing, our profit might be headlined as representing a "SENSATIONAL 20,000% ANNUALIZED GAIN!!!!!!!!!"

The U.S. could be hit with widespread food shortages as early as April, according to an article linked recently in the Rick’s Picks forum, “Food Supply and Affordability Are Seriously Threatened.” The author, Kellene Bishop, alluded to a perfect storm of factors likely to impact food supplies and prices. “It’s headed into our homes no longer than six months from now, and more likely to be obvious six weeks from now. Unless you’re enjoying an income that can take a 40-50% increase hit in your essential expenses, then I’m certain you will not be spared the impact of this snowball that’s rolling down hill, gaining in momentum and size; and it’s coming right to our front doors.” Evidently not one to panic, Bishop suggested that in anticipation of grocery-supply disruptions and explosive price increases, we start preparing now with a “methodical, peaceful and deliberate mindset” and no fears of an Armageddon-like event. “I believe firmly that a daily awareness and effort to create a more self-reliant world is critical in developing one’s ability to endure any other type of crisis.” Not all of those who commented on her essay shared the author’s Zen approach to getting ready, however. There was this response, for one, from a take-charge dad whose brood seems unlikely to starve even if America a few years from now comes to resemble the post-apocalyptic vision of hell-on-earth depicted in Cormac McCarthy’s The Road. “I Spent 11 years in the US Army,” he wrote, “three years in a Ranger battalion, two years as a weapons instructor, one year as a Pathfinder team leader, five years’ regular infantry, and one combat tour. Because of this I have no illusions of the evil that lurks in the hearts of men -- seen it first-hand. I am a single parent…my 14-year-old son and I have