December 2012

This session featured the epiphany of a hitherto unrecognized E-Mini S&P target at 1337.75. There were several ways to get short, but as you will see, the decision we made hinged as much on guts as on coldly mechanical reasoning. Incidentally, two days later the trade was solidly in-the-black. At least one student who attended the class ‘did’ the trade, which he shared in the chat room in a timely way.

It's shortly after 3 a.m. EST and index futures are trading moderately higher, with the E-Mini S&Ps up the equivalent of about 50 Dow points.  This is short-squeeze bait if there's bullish news to greet the day in New York; however, if the news turns out to be excruciatingly boring, as it so often is, expect DaBoyz to ease the broad averages back down to unchanged, there to wait for a better opportunity to goose stocks past whatever supply may have accumulated since the last goosing.

It's still too early to know whether we caught an important top with the 1337.75 target discovered during Wednesday's tutorial session, but it's clear enough already that we caught a tradable top. Price action was too erratic yesterday to produce a useful target for Friday, however, and a short-squeeze at the  close made it even tougher. It was attributed to a supposed invitation, Obama to Boehner, to talk about the budget.  The kick-the-can agreement that could come at any time will surely be used to short-squeeze the market yet again, even though whatever agreement comes is not likely to help the economy or stocks in the long, intermediate or short term.

The institutional crazies, village idiots and knee-jerk opportunists who bought shares yesterday following a Fed announcement of yet more monetization seem not to have been paying attention, at least initially, to the nasty sell-off in T-Bonds.  Well before yesterday, any sentient being would have surmised that easing’s impact on the economy had reached the point of diminishing returns. With administered rates pegged at zero and mortgage loans near historical lows, how much more boost are we to expect from yet another gaseous effusion of bank-system credit?  Most of it is going unused anyway, other than by banks for the purpose of “buying” – you got it! –  Treasury paper. Contemplating this stupid shell game probably gets a faux Keynesian like Krugman hard, but sage T-Bond traders evidently were having none of it. As a backdrop, the Fed has been buying $45 billion of T-bonds each month, but offsetting it by selling a like amount of short-term Treasurys.  With yesterday’s announcement, the central bank ditched the offset, clearing the way for an increase in the Fed’s portfolio of “assets” above the current level of $2.861 trillion.  This latest twist in the soon-to-expire, dumber-than-dumb Operation Twist got a big thumbs-down from the bond traders, who drove futures prices sharply lower. Stocks, for their part, relapsed after the obligatory, news-driven short-squeeze, demonstrating that although the Fed may be capable of managing inflation expectations, its ability do so is no longer to be reckoned in months or weeks, but in minutes. Bullish on T-Bonds Despite the long bond’s plunge, we remain bullish on it down to 2% -- but not because of the Fed’s insatiable appetite for auction paper. As we saw yesterday, the promise of more easing has become a short-term negative for bonds. However, we expect the effect to be overshadowed, at

Gold is getting hammered early Thursday morning, although not for any apparent reason. The raggedy bear pattern shown projects to 1675.80, but that Hidden Pivot lies too close to the November 5 low to be worth much for bottom-fishing.  Still, with the 1700.50 'p' midpoint support already breached, and the 11/5 low begging to be tested, the target makes a logical minimum downside objective for the near term. Since hysterical speculation seems likely down there, 'camo' traders will have an edge if they look for the reversal via a simple impulse leg on the two-minute chart.

My trading advice is to find something else to trade, since the price swings have been psychotic.  Not that that poses any particular problem for us -- only that there are more relaxing vehicles at our disposal. Two things to notice about yesterday's whoopee cushion ride: 1) if you blinked you missed it; and 2) the apex, a classic bull trap, failed by a hair to surpass a key external peak at 33.930 recorded on 12/3.  This type of action is both gratuitous and malicious, but it leaves the impression nonetheless that Silver is bound and determined at the moment to go anywhere except boldly higher.

We oohed and ahhed during yesterday's tutorial session yesterday when we realized in real time that the pattern shown was just inches from a juicy 'D' target at 1437.75.   At least one subscriber shorted it, and he graciously posted my trading advice in the chat room as the pattern was ripening.  It took more than an hour of choppy, toppy action before short sellers could sit back and relax, but if you waited patiently for the pattern to generate a 'camo' entry signal on the 3-minute chart, you were rewarded with a halfway decent one at 1434.25 around 2:54 p.m.  (You can learn to do this stuff yourself, and it's easier than you think. Click here for details -- and a $50 discount coupon.)

We were excited to discover a very short-able 'hidden' resistance at 1437.75 in the E-Mini S&Ps during yesterday's weekly tutorial session.  Making this epiphany even more exciting was that the actual high at 1438.75 closely coincided with the rally target we'd used to get short in the Diamonds a day earlier.  The coincident tops are likely of more than minor importance, since it took the respective trading vehicles nearly two weeks to reach them. If we've shorted a major top, it will become clearer in the days ahead.  Click here if you don't subscribe but want to join in the fun.

For gold-watchers, I've included a chart with today's February Gold tout that is intended to take some of the stress out of your vigil.  At a glance, you'll be able to see exactly what must occur for bulls to take charge of the short- to intermediate-term trend -- and also what it would take to all but guarantee a run-up to $1800.  Click here for a free look.