August 2011

The action looks toppy, and although I still expect the futures to hit 1650.30 over the near term, we should be extremely cautious if and when that Hidden Pivot is reached. Even more immediately, we'll continue to monitor minor corrective patterns for signs that something worse may be in the offing. That means keeping an eye on the 1607.60 target shown in the chart, since its decisive breach would be warning of possible trouble. Notice my use of a one-off 'A,' a tactic which in this case promises to yield the most accurate midpoint and 'd' target.

IBM plunged more than $5 yesterday after springing a nasty trap on bulls on the opening bar. It worked out perfectly for us, though, because we were able to short two August 170 puts for 1.15 -- slightly less than we paid a while back for two August 175 puts when the stock was trading near its all-time high, 185.63.  The net result is a bearish position that can make us as much as $1000 if we are right but cost us no more than $10 if we are wrong.  In effect, we are getting 100-to-1 odds against the stock's sinking to $170 or lower by August 19.  The cherry on top is that we stand to make $200 per point at expiration for each point IBM is trading below $175 -- just 2.8% below current levels.  This is the only way to play put options, as far as I'm concerned, since no retail customer I have met in nearly 40 years of option trading has made amy real money buying puts.  Better to leg into positions that have almost no-risk and plenty of upside. Now we can forget about it and relax. In the meantime, I will continue to look for trades that even novices can do that have the potential to pay for the cost of an annual subscription to Rick's Picks. Want to learn how to do this trick yourself? Click here for a free trial subscription to Rick's Picks.

Price action in this vehicle is for the nimble and sporting only, since the ups and downs of late have been too vicious to position-trade. Assuming yesterday's low holds, the futures would become faintly interesting on the hourly chart once 1319.00 has been exceeded to the upside on a closing basis. That is a Hidden Pivot resistance associated with a 'D' rally target at 1367.75.

The steep rally of the last few days is closing fast on a 130^00 target given here earlier, shifting our focus to an even larger ABC uptrend with the potential to push this vehicle to as high as 132^27.  Although its sibling midpoint at 127^16 has already been brushed aside, buttressing the bullish outlook, any pullback approaching it should be viewed as an easy opportunity for camouflageurs to climb aboard.

[Our good friend Doug Behnfield – by far the savviest financial advisor we know -- was hard at work Sunday, prepping an ultra-rare 1972 Citroen he’s restoring for a $10,000 paint job in Florida. He had just fixed the air conditioner in his wife’s Cayenne – a day’s work that would have cost him $1,200 if the Boulder Porsche dealership had done it. He had also just put the finishing touches on the essay below.  It explains why America is in for some very hard times as we work off debts that have been accumulating for decades.  Doug is no pessimist, however.  Far from it.  He says that although we face a deflationary depression that will exact big sacrifices from all of us, America will be better for it, able to return to the core strengths that made the country great. RA] Genius survives the test of time. Beethoven, the Beatles. The Brothers Grimm, Hans Christian Anderson. T. Rowe Price, Bob Farrell. Stan Salvigsen and David Rosenberg.  The Pied Piper by the Brothers Grimm describes the consequences of stiffing the creditor -- in this case the rat exterminator paid in florins -- after a job well done. The Village of Hamelin loses all of her children (except for the crippled boy who can’t keep up) when the piper lures them to a cave that is sealed up by an avalanche. Grim indeed. Today our Nation is facing the mother of all due bills now that we’ve had our heads extricated from the sand by the Tea Party. Congress and the President have settled on a fiscal restructuring plan that calls for $2.4 trillion in savings over the next decade, an increase in the debt ceiling and the creation of a congressional committee to recommend long-term fiscal reforms. The legislation acknowledges

From Peggy Noonan, here's a nice companion piece to the hit-job from Fouad Ajami linked above.  This essay -- Noonan at her best, which is saying something -- says Obama is unloved even by his remaining supporters, a loser who can no longer connect to the American people.

Notable and quotable, from a Wall Street Journal essay penned by Fouad Ajami: "Temperament mattered. Ronald Reagan was the quintessential optimist, his faith in America boundless. He had been given his mandate amid economic distress—the great inflation of the 1970s, high unemployment and taxation—and a collapse of American authority abroad. Through two terms and a time of great challenges, he had pulled off one of the great deeds of political-economic restoration. He made tax cuts and economic growth the cornerstone of that recovery. Economic freedom at home had a corollary in foreign affairs—the pursuit of liberty, a course that secured a victorious end to the Cold War. The 'captive nations' were never in doubt, American power was on the side of liberty. "By that Reagan standard, Mr. Obama has been a singular failure. The crippling truth of the Obama presidency is the pessimism of the man, the low expectations he has for this republic. He had not come forth to awaken this country to its stirring first principles, but to manage its decline at home and abroad. So odd an outcome, a man with an inspiring biography who provides no inspiration, a personal story of 'The Audacity of Hope' yielding a leader who deep down believes that America's best days are behind it." To access the full essay at freerepublic.com, click here.

For a nice change, despite the fact that Silver futures are getting pounded tonight,  Silver Wheaton shares are refusing to confirm.  Be that as it may, we'll hew to the 38.285 correction target of the pattern shown as a minimum short-term objective.  It is a bearish sign for the very near term that the 39.345 midpoint support associated with that number has been exceeded Sunday night by a decisive five cents. The target is too close to the 38.215 low recorded on to bottom-fish with our usual penny-ante stop-loss, but I'd encourage traders to look for the camouflaged turn -- and possible trading opportunity -- from around 38.300 on down. To rout the bears --badly -- buyers would need to push this vehicle above 39.970 today without having let it fall to the 38.385 target.

On Friday, Rick was interviewed by Al Korelin of The Korelin Economics Report. In this segment, Rick discusses the future of gold and silver.