January 2012

[There was some discussion in the chat room this morning concerning Hecla's steep plunge.  The closure of the firm's Lucky Friday mine by regulators has created an excellent buying opportunity, says our friend Phil Calderone.  He spells out the reasons below. Please note that from a Hidden Pivot standpoint, the stock looks like it has further to fall.  The low so far on this morning's nasty gap was 4.25, but HL could fall to as low as 3.72 before reaching hidden support. RA] The oft quoted saying, referring to the Chinese symbol being the same for crises and opportunity, has indeed provided such an opportunity. The single biggest fear for investors in legitimate mining companies (i.e., where the mineral actually exists) is an accident that temporarily halts production. Such an occurrence happened to HL's Lucky Friday mine in December. Today, the company announced that the government regulators are making them keep the mine closed for the rest of this year to repair the damage and make the facility safe to reopen. Naturally, the stock is getting crushed. This is one of the major reasons why I have repeatedly recommended 90% of one's assets be invested in CEF (no mining risk) and only the rest be considered for a speculative trade in HL. The opportunity is that HL still expects to produce 7 million ounces of silver in 2012 versus its earlier projections of 9 to 9.5 million ounces before this development. The silver in the ground doesn't disappear like an oil spill. It is still there. It will cost more to bring out with the added expense of cleaning up and repairing the facility, but their production cost of about one dollar an ounce is insignificant to the price of silver. So, anyone who hasn't bought HL before, gets a

How odd that gasoline prices have fallen below $3 a gallon even as Iran's threat to close the Strait of Hormuz is turning crude quotes buoyant above $100.  The minor rally pattern projects to 105.46, and although energy prices have not been in the  headlines recently, they will be on everyone's mind if the target is breached and $11o becomes magnetic.

Silver would have to rally a further $5.50, exceeding 35.680, to negate the scary targets below $20 broached here earlier, but the $4 rally so far is an encouraging start.  It projects to at least 31.030, but if that Hidden Pivot fails to slow buyers down, we'd be looking at a possible rampage to as high as 32.145. To assess buyers' resolve, we should pay close attention to the 'external' peak at 31.070 that was recorded in mid-December in the throes of a steep fall.  If buyers pay it little heed, that would be the most heartening technical sign we've had since October, when the futures embarked on a 12% rally that ultimately failed.

Much as we love to hate the dirtballs who maneuver stocks higher on low volume in the dead of night, gold seems to be benefiting from the same dynamic. Shortly before 2 a.m. EST, the March contract was doing what it had been unable to do during the regular session -- i.e., pushing above two important 'external' peaks made in December. It has already exceeded the first at 1643.70, and the second lies but a single point above the so-far high, 1644.80.   This is most encouraging, although, as noted here yesterday, it will be far moreso if the rally can continue past a third peak at 1681.70 before pausing for a retracement. Want to learn how we use Hidden Pivots and “camouflage” to reduce entry risk to relatively small change? Click here

The fresh perspective in today's E-Mini S&P tout is intended not only to stretch the bullish imagination, but to encourage you to trade 'camo' patterns more aggressively as the market moves higher. This is a good time to ponder the charts without getting too caught up in their meaning.

We've been focused on relatively trivial -- albeit tradable -- rally targets recently, but the accompanying chart is intended to coax the bullish imagination a bit. It shows an ABC rally pattern stretching back to early October with a 1362.25 target. That's equivalent to a Dow rally of about 700 points, which would boost the blue chip average comfortably above 13,000. The midpoint resistance associated with the target lies at 1252.00, and although the Hidden Pivot 'effect' at that price is not especially compelling, we should not overlook the fact that the futures have used it this week as a launching pad.

There was good news yesterday for taxpayers, sort of:  the Federal Reserve turned $76.9 billion in 2011 profits over to the U.S. Treasury.  The not so good news is that it amounts to a meager 2.6% return on the Fed’s $2.9 trillion  portfolio. That may be better than George Soros and John Paulson did last year, but at what risk? Keep in mind that quite a few of the paper “assets” the Fed holds are still radioactive, including a mountain of subprime mortgages that would fatally poison the U.S. banking system if they were returned to their rightful owners.  Not that we even know who the rightful owners are; for in legal fact, the securitization mania of the past decade cast doubt on the title to each and every mortgaged home in America.  Thanks to the Fed, however, our commercial banks needn’t worry about such things. That’s why they pay protection money to Bernanke, buying Treasury paper by the boatload so that everything gets taken care of.  And what does the Fed care if it’s holding trillions of dollars’ worth of dodgy paper for the banks? It could write a check for Fannie and Freddie tomorrow and have enough left to over to buy every bank in Europe. Unfortunately, this is effectively what the Fed has been doing via “swap” arrangements with the European Central Bank. The agreement is formally called  a “temporary dollar liquidity swap arrangement,” but the actual mechanism, like laws and sausages, was not meant to be scrutinized. For if it were, it would make the most brazen Ponzi scheme look as squeaky clean as a Lutheran bake sale.  Actually, compared to today’s high-level paper shufflers, Ponzi was a sap, working long hours to raise real money from new clients to pay old ones. The post-modern central

At around 10:30 p.m. EST, the E-Mini S&Ps were slithering above a 1278.50 midpoint resistance that had stymied bulls for more than a week. Assuming this sleazy, short-squeezy, volume-less action is the breakout we've all known was coming, I've suggested that night owls use the 10-minute chart (or less) to initiate longs via camouflage.

The 15% rally that has unfolded since December 29 is still just noise on the hourly chart, no more than a dueling offset to the robustly bearish impulse leg created that day with a bottom at 26.85. Looking ahead, there are just three benchmarks that will matter for bulls: 32.69, 34.36 and 36.50.  Merely exceeding them will not be enough, either. What is needed is an upthrust that gets past the first two without much difficulty. We await the effort, but until it succeeds, a major downside target at 20.72 (HP midpoint=29.05) will remain very much in play.