January 2012

Because U.S. markets will be closed Monday in observance of Martin Luther King Day, the next Rick's Picks updates and commentary will be published Tuesday.  Have a great weekend!  Click here for a look back at the protests of the Sixties, complete with a 'Mothers' soundtrack that comes courtesy of our friend Jon Auerbach.

One step forward, two steps back.  At this rate, 2012 could come and go before the futures reach some of our more ambitious targets.  A less ambitious one at 1316.75 is where we should set our sights for now, and it would become an odds-on shot if and when the futures settle above a lesser target at 1301.75 broached here yesterday. The higher number's provenance is shown in the chart. Night owls should look for 'camouflage' opportunities on the 15-minute chart or less -- specifically via an external peak at 1292.75 that was within a hair of being exceeded.

[Rick’s Picks sometimes ascribes human, animal or even demonic qualities to the vehicles we trade, most particularly the ever-vexatious Mini-Index futures. The following, first published here nearly a decade ago, reminds us why. RA] In all the galaxy, could there exist a nastier little critter than the S&P futures? Yesterday, watching the [March] contract leave its hellishly agitated footprints all over my intraday charts, I was reminded of the creature in the movie Alien. In its “cute,” post-larval stage, the then knee-high monster resembled a small dragon, with tiny buzz saws and metallic razors in place of reptilian scales, and venomous syringes instead of teeth.  Those who saw the movie will not forget the way the creature skittered around the space station floor, finally disappearing for a few excruciating minutes before exploding, with a wicked, other-worldly cackle, from the chest of a hitherto unsuspecting male crewman. And so it was yesterday with the [E-Mini S&Ps], as they feinted and darted, bounded and careened, emerging with a bloody victory over all but the very hardiest of day traders. Talk about vicious! The S&Ps would make house pets of monsters such as the one in Alien. Thus, on Thursday, amidst brutal tedium and, until the final hour, trendlessness that was unusual even for this so-far excruciating post-holiday period, did the [March] S&Ps parry an intrepid army of traders, never sustaining a rally or decline for long enough to allow them to draw an untroubled breath. The invincible tormentor of these determined warriors is a Freudian nightmare come alive, an all-knowing predator whose every movement, at any instant of the day, is willed by a thousand ids and egos, each struggling to come out on top.  But even when the S&Ps are momentarily at rest they throb with menace, fueled by the unspent

Yesterday I published Phil Calderone's still-bullish take on Hecla.  Below is an interesting way to play the stock from my friend Zane Binder.  This is presented caveat emptor, without endorsement or further comment. "Have been researching Hecla and there are many ways to play it. The main question is will they be profitable when their silver production falls from nine to seven million ounces. On top of this one must consider what it will cost to clean up the mess at the closed mine. It'll be closed for the rest of the year, allegedly, but why is only a guesstimate. Worse, things like this often take more than the originally foreseen time. Keep this in mind as you read this (and I'd guess that Hecla will sue the Feds to reopen that worthless pit if the mine can be cleaned up sooner. And will Hecla be fined? Unknown ...) "Anyway, there are many ways to play. First, Hecla has a Series B cumulative convertible preferred (the key word is cumulative) selling for (and redeemable at) $50, it's selling for $53). It can also be converted any time for $15.55 a share. It pays $3.50. If Hecla has to chop off its common and preferred dividends it's a good bet the preferred owners (it's cumulative) will get paid sometime down the road. So far the preferred isn't suffering like the common. If it does tank this will be a decent play (and if it doesn't it's still a halfway decent speculation). "Secondly, the common is amenable to various bear spreads BUT that big gap down is dangerous. The market hates a vacuum and I expect at some point that gap down will be "filled." Beware ... but a short term spread, I believe, may be another, but risky, way to go. "Third, just buying a few calls

Natural gas quotes have been in a death spiral for so long that it's probably time to start paying attention.  I've sketched out a detailed 'camouflage' scenario in the chart accompanying today's tout, including a specific screen alert that could help you get long. Check it out if you want to see what low-hanging fruit looks like.

A worst-case target of 2.305 first appeared here around Thanksgiving, but we should be prepared nonetheless for a bullish turn from somewhere above it, since the death rattle could be ferocious -- and potentially very profitable to trade.  I would suggest setting a screen alert at 2.832, since that's where the 10-minute chart would turn impulsively bullish for the first time in ages.  A B-C pullback from somewhere just above it could provide a low-risk 'camo' opportunity to grab a tiger by the tail.  If the sketched -out trade fills, let me know in the chat room and I'll establish a tracking position for your further guidance. _______ UPDATE (January 16): The futures were barely able to muster a dead-cat bounce on that last effort.  Even so, the 2.305 will remain a good place to try bottom-fishing aggressively with our habitual penny-ante stop-loss.  _______ FURTHER UPDATE (January 23): The futures have taken a hysterical, short-squeezey, Wait-Until-Dark lunge this morning that is too insane for us to seek camouflage. The fact that it has come from more than a  penny below my 2.305 target is not exactly bullish, but we'll give the move the benefit of the serious doubt nonetheless as the possible liftoff from a bear-market low. Supplies of natural gas are said to be in multiyear excess, but that could change more quickly than most "experts" imagine simply because heating oil is getting too expensive for the American middle class.

The 31.030 rally target given here yesterday continues to serve as a minimum objective for the near term, but a close above it would augur more upside over the near term to as high as 32.145.  The effort so far this week has created a bullish impulse leg on the daily chart by surpassing an 'internal' peak at 29.740 recorded last Wednesday and an external at 30.210 from December 21, implying that any pullback that doesn't breach 29.210 to the downside would be setting up another rally leg. More immediately, night owls can use the pattern shown to try to get long. The entry signal has already been tripped at 29.930 on the '15', so you'll need to drill down to the '5' to get aboard belatedly.

As detailed in today's commentary, gold's modest rally yesterday was more encouraging than it may have looked, surpassing no fewer than three prior peaks on the intraday charts.  The key to the intermediate term, however, is the rally's ability to vault past yet another peak at 1681.70 before buyers take a serious breather.  All key price points are shown in the chart, the same one I've used in my commentary.  Night owls looking for a way to get long risking relatively little will need to drill down to the 10-minute chart, where at this very moment a very nice camo pattern has tripped an entry signal at 1644.50 (A=1641.50 at 6:40 p.m. EST, B=1645.20).

The noodling around of the past few days has pushed our minor rally target slightly higher, to 1301.75, predicated on a healthy push past its sibling midpoint at 1290.50.  That's 1.00 point above the high achieved in the closing minutes of yesterday's session, but until buyers put it behind them, we won't leap to conclusions.  For night owls looking to get long, a decent 'camo' pattern developing early Wednesday evening looked promising.  Want to learn how we use Hidden Pivots and “camouflage” to reduce entry risk to relatively small change? Click here