July 2011

No sooner did I take this vehicle off the sheets out of boredom than it fell, finally, to within a hair of a longstanding target at 1.5859. We found a camouflage opportunity to get long briefly during yesterday's impromptu webinar as the futures were making the turn, and although the position went marginally profitable on the five-minute chart as we watched, they were sinking again in the early evening  The target remains valid nonetheless, and I would therefore encourage night owls to use it for camouflage if it is reached on the implied slight dip beneath Monday's low. Incidentally, these impromptu sessions, where we look for real trades in real time, are open to all Rick's Picks subscribers and great fun. If you want to join us for the next one, and to access a 24/7 chat room frequented by seasoned traders from around the world, click here for a free trial subscription. _______ UPDATE (11:37  a.m. EDT): Slippage far beneath the target last night couldn't be worse news for the pound, since the pivot was a clear, major Hidden Pivot support. This is not withstanding the sharp dead-cat bounce that is occurring at this moment.  The breach of the support implies the pound is on its way down to at least 1.4396, with 1.1827 possible over the longer term.  Who thought the sun had already set on the British Empire!

It warmed the cockles to see the Dow Industrials and Gold moving in opposite directions yesterday, even if the latter swooned a nasty $15 intraday before scaling the wall a second time to close near the highs.  The world somehow makes more sense to us when gold prices are rising and shares are falling.  Isn’t that what’s supposed to happen when the central banks are hell-bent on trashing their respective currencies, and every economy outside of China’s continues to grind toward cliff’s edge?  The news wasn’t all bad, either. For one, scientists have apparently made some progress in figuring out why Lyme’s disease recurs in some people. Much closer to Wall Street obsidian heart was a report from Alcoa that profits had more than doubled in the second quarter.  Unfortunately, you’d have to be an old-timer to remember when good earnings from the likes of Alcoa was enough to push the U.S. stock market higher.  Anyway, probably a dozen Alcoas would not have made up for the deepening gravity of Europe’s financial plight. Whereas it supposedly was only Greece that was in need of critical care, now Italy has joined the short list of financial basket cases close enough to disaster to take the whole system down. And yes, we are being deliberately ambiguous when we avoid mentioning which “system” might come crashing down.  Europe’s financial house of cards?  The global banking system? The world economy? Frankly, we can’t even guess how far the damage might spread if “confidence” in Greece, Italy…Spain! were suddenly to evaporate.  We’ve put quote around the word “confidence” because only an imbecile could fail to see that whatever confidence exists is egregiously misplaced.  Even so, misplaced confidence is better for the time being than no confidence, since it’s all that’s keeping the global financial system

During the Oscar telecast one year, Johnny Carson wisecracked that if a terrorist were to blow up the auditorium and kill everyone in the audience, it would be the worst thing ever to happen to showbiz but the best thing to happen to Pia Zadora's never-quite-airborne career as a singer and actress.  And so it is with the Pia Zadora of the currency world, the U.S. dollar. It is buoyant tonight as the muckety-mucks of eurobanking prepare to meet on the developing crisis in...Italy!  What with Greece garnering most of the headlines recently, we'd almost forgotten that what remains of the Roman Empire is in equally deplorable financial shape. The euroministers have roundly denied that an emergency meeting scheduled for this morning has anything to do with Italy's worsening situation, but that's the same as spelling out "Crisis in Rome!" on a marquee. A Forbidden Question And speaking of Europe's debt problems, in the latest issue of The Privateer, editor Bill Buckler asks a forbidden question that puts things in lucid perspective:  "How can [Greece,] a nation of 11 million people expect to pay off a government debt amounting to 475 billion euros? We have read variations on this question many times in the mainstream financial media," Buckler notes, but "we have yet to read this question: 'How can a nation of 310 million people expect to pay off a (funded) government debt amounting to U.S. $14.5 TRILLION?'  If you do the arithmetic, you will see the ratio of debt to population is slightly lower in Greece than it is in the U.S."

Check out the stunning power of the impulse leg on the daily chart!  The move from June 23's one-off low at 54.06 has eclipsed no fewer than one "internal'" peak and  five "externals" in a sensational run-up that streaked for nine days without pausing for breath. The rally's strength was foretold by an initial, minor rally from the mid-June lows that easily surpassed three external peaks on the lesser charts. At the time, I commented that bears would soon be in for a rough time, and that has proven to be the case.  Friday's over-the-top finishing stroke will set the stage for a continuation of the rally to the 61.73 Hidden Pivot shown in the chart. It may take a week or two for the Cubes to consolidate for the move, but rather than speculate on its timing, we'll simply monitor the lesser charts for the first sign of a launch, jumping aboard if and when the opportunity suits our risk-averse style.  (You can do these calculations yourself, quickly learning how to out-forecast even seasoned gurus. Click here for further details and a $50 discount to the upcoming webinar.)

Pay no mind to Friday's selloff, since news of an uptick in unemployment will not likely have affected the delusional thinking that has powered stocks higher for the last 28 months.  On Friday, many subscribers were on hand when we caught the beginning of the turnaround during an impromptu webinar. We can do it again, for sure, but there were no easy opportunities as the session drew to a close. Stay tuned, since a still-viable target at 1382.25 is likely to provide more chances to leverage the upside.  _______ UPDATE (11:55 p.m.):  The Sunday Night Sleazeballs have done what they do nearly every Sunday night -- i.e., take the index futures down far enough to exhaust sellers, the better to run stocks higher on near-zero volume ahead of Monday's opening. It's hard to say how the gathering storm over Rome might affect U.S. shares, but so far tonight the low of the shakedown has been 2.50 points above the nearest midpoint support.  It lies at 1329.75, and a decisive breach would augur more slippage to at least 1317.25.

Friday's spirited rally at the opening bell was over in minutes, leaving traders with little to do but pick their teeth for the rest of the day as the futures shuffled sideways in a tiresome consolidation.  It projects unmistakably to 1555.00, but traders will have to be nimble and alert Sunday night to catch a piece of the implied $10 thrust.  Pivoteers might want to note that the intraday high occurred a single tick from the 1546.10 Hidden Pivot midpoint of the pattern shown. This implies that any move above it will produce a precisely tradable top at 1555.00.  That number would become our minimum upside objective for the very near-term as soon as 1546.10 is exceeded. _____ UPDATE ( 9:19 a.m. EDT):  Gold's thrust this morning has somewhat bettered the forecast, exceeding a 1555.00 target by $2.20 so far. This is bullish going forward and portends more upside to at least 1564.00, a Hidden Pivot target that can be found by sliding down to July 7's 1525.40 low for a new 'A'. It's so very nice to see gold moving opposite stocks for a change, since it suggest the usually tone-deaf imbeciles and brazen thieves of the financial world "get it" with respect to how close Europe is to the edge of the abyss.

Wall Street’s Christmas-in-July revelry proved short-lived when it was reported on Friday that the U.S. economy had created just 18,000 non-farm jobs in June. Recall that a day earlier, speculators goosed the Dow Industrials more than 200 points above the previous day’s lows on word of a faint blip in retail sales and a drop in jobless claims. Not much to celebrate, really, but it was all the mainstream media (MSM) needed to cheerlead the officially sanctioned story of a strengthening U.S. economy.  Alas, as the week drew to a close, traders sank back into apparent despair, evidently persuaded by the news of the moment that Thursday’s statistical oasis had been but a mirage. For their part, the news media showed no discernible embarrassment over their ongoing, schizophrenic coverage of the economy’s supposed ups and downs.  When will they cop to the fact that regardless of whether stocks are rising or falling, the economy is down-and-out and likely to remain so for as long as the government acts out the fable of a Keynesian recovery? We wonder whether the financial press is even capable of understanding that it’s not the news that causes stocks to rise and fall, but cyclical forces that lie beyond our understanding. Moreover, it is the movement up or down of stocks that colors our perception of news rather than the other way around. Thus, on days when the broad averages have rallied on “bad” news, the network anchors will assert that “investors,” prescient and wise as ever, have looked beyond the negatives to glimpse sunshine on the horizon. Similarly, when stocks fall on “good” news – say, a downtick in unemployment -- the mainstream media (MSM) will play down the statistic and magnify another that seems more simplistically compatible with falling stocks. Obama's Fate Overall,

Even for the nimblest traders, Silver's rally on Friday proved nearly as challenging as Gold's.  While the latter did its thing in the opening minutes and then spent the rest of the day in a tedious consolidating, Silver surged at the bell, then reversed direction so sharply that it nearly crashed into the launching pad. The ostensibly frightful action needn't have troubled bulls, however, since, in the midst of its histrionics, the September contract managed to surpass a key "external" peak at 36.785 recorded on June 22, refreshing the bullish energy of the hourly chart. For now, I've used the pattern shown to project minimum upside over the near term to 37.415. Once the sibling midpoint at 36.820 has been overcome, getting to the target should be a lay-up.

The Wall Street Journal's Brett Arends, writing for MarketWatch, has come up with ten good reasons why we are doomed to repeat 2008. Click here for his well-argued list.