January 2013

I prefer to show you winning trades, but there's a lesson in pondering this would-be loser.  An ambitious rally target at 1494.50 remains valid, as you'll already know, but  it would appear there is at least another half-day or so of selling to be reckoned with before bulls recover their  mojo. This is what I've inferred from the failure of the very fetching bullish 'camouflage' set-up shown in the chart to pan out.  I'd have buy-stopped myself in at the 'x' entry trigger, only to have been disappointed when the futures failed to better the entry price by more than a single tick before relapsing to new lows.  When a trading vehicle becomes this cagey, we need to become almost too cautious to trade.

Subscribers had an opportunity to do an actual "camouflage" trade in February Gold during yesterday's impromptu session. Check out the chart accompanying today's gold tout if you want to see what we did.  As of Monday night, the position was lifting above the original target, implying that a bullish pattern of larger magnitude was in play.  Click here to sample Rick's Picks for free, including access to a 24/7 chat room and notification of impromptu online teaching sessions such as the one noted above.

I opened a virtual classroom yesterday when February Gold developed a tradable pattern in the early afternoon.  Subsequent price action met our expectations almost exactly, but that didn't mean easy money for those who actually took the trade. Entry was triggered at 1647.00 shortly after noon Mountain Time (see inset), and I encouraged those in the room to initiate the trade, even if it rated only a 'six' on a one-to-ten scale of desirability. At the time, I warned that it might take patience for the futures to hit the 1648.10 midpoint pivot where we could take profits on half of the position. In fact, it wasn't until 80 minutes later that this occurred.  From there, it was another three-and-a-half hours before the rally finally hit the target 1650.40. Now, as I write these words, bulls are lifting February Gold above the target, suggesting that the target of a larger pattern is in play.  In fact, there is one at 1655.20 that we can use now that the futures have pushed above its midpoint sibling at 1652.90 (3-min, A=1648.50 at 7:06 p.m. EST; B=1653.10 at 7:18 p.m., and C=1650.60).  You can learn to do this stuff yourself, and it’s easier than you might think. Click here for information about the upcoming Hidden Pivot Webinar.

We hold a bull spread that is guaranteed to make money  -- two dozen March 30-33 verticals legged on in November for a 12.5-cent credit.  We stand to make as much as $7500 if Facebook is trading above $33 come March 15, but no loss is possible since we own the position for a net credit of $300. FB has rallied sharply since we completed the spread, hitting a recovery high of $29.79 yesterday while the broad averages were falling.  Although I doubt it can keep up the pace, yesterday's thrust refreshed the bullish impulsiveness of the daily chart by exceeding July's highs near 29.50. And while this is no guarantee that our spread position will achieve the maximum theoretical gain of $7500, it is sufficient for now to make us feel pretty good about it. 

With index futures entering their fourth day of an apparent consolidation, I've suggested using the 15-minute chart to find a camouflage entry opportunity amidst the tedium of shallow ups and downs in the E-Mini S&Ps.  You should also check out today's Gold tout if you're  itching to trade, since the chart accompanying it is explicitly detailed to show how a juicy, low-risk opportunity could unfold.

Put aside the bearish target at 1606.40 for now although it will remain theoretically valid until such time as 1695.40 (aka 'point C') is exceeded to the upside.  My justification for this is the rally's leap on Friday well above the 1650.90 midpoint pivot associated with the target.  That leap can be seen as an abc pattern projecting to the well defined target at 1664.10 shown in the chart.  It will take a little more than that, however -- specifically, a print above the 1665.30 high shown, to refresh the bullish impulsiveness of the 15-minute chart.  That high could provide a juicy opportunity for camo traders seeking to get long, since a pullback from a tick or two above it would be read as a stall by the herd.  I've sketched the hypothetical trade in exacting detail for your further guidance. ______ UPDATE (11:55 a.m. EST): Gold's mild relapse has negated our strategy. However, camouflageurs could try bottom-fishing at either 1644.70 or 1637.40. They are, respectively, the p and d Hidden Pivots of the corrective pattern (on the 15-minute)  a=1657.30 (8:30 a.m. EST); b=1642.60, c=1652.10. You can learn to 'camouflage trade', and it's easier than you think. Click here for information about the upcoming Hidden Pivot Webinar.

Dow 20,000?  We seriously doubt it, although our good friend James Tolard explained why he thought it could happen in a guest commentary here last week. What were his reasons?  Okay, you’re having a little trouble remembering why he was so bullish. So are we. His arguments didn’t quite stick to our ribs. You may recall there was a lumber chart that accompanied the essay. What was that all about?  Well, Jim mentioned that rising lumber prices imply that the uptick in the housing sector is no fluke.  Our take is that the uptick is pretty feeble considering how many trillions of dollars the Fed has shot at the singular objective of inflating home prices. We think the housing mini-boom will end by mid-year, followed by a resumption of real estate deflation that eventually will reduce values to 30% of the peak valuations achieved in 2007. Jim also mentioned that big companies can borrow for practically nothing. While that may sound like a good thing, the bad news is that they have found little productive use for all of that cheap money.  Actually, the best reason they’ve been able to come up with for borrowing it is that they can.  Some companies are doing it even though they hold surplus cash of $10 billion or more. And why not?  It never hurts to have as much cash on hand as possible for that rainy day, right?  Our take is that the rainy day is not going to be quite what corporate treasurers are expecting.  While they are looking ahead to the next recession, we see a financial cataclysm taking shape that will turn U.S. corporations’ supposed $2 trillion surplus into digital fumes overnight. A Nutty Idea After all, It’s not as though the firms have stored this unused, and currently

It has long been a given that economic Armageddon would commence with a run out of dollars and Treasury paper. But when? There are signs that enthusiasm for U.S. Bonds has been waning among some of our biggest lenders, bringing us closer to that potentially hyperinflationary day when the Fed and its dealer network are the only buyers of U.S. debt at auction.  Also, with Japan, currently the largest buyer of Treasuries, now seeking to promote domestic inflation of at least 3%, another source of support could weaken as they shift buying toward their own paper. These are developments that could finally bring market forces to bear on U.S. debt, forcing the Fed's hand toward a possible hyperinflation. For the time being, however, the ultimately flawed notion of T-Bonds as a safe haven holds sway among institutional lemmings, and that's why we shouldn't be so quick to write off the bonds merely because they have been falling since late November.  If you're interested in a technical picture that supports this conclusion with one caveat, check out today's T-Bond tout, which includes charts both the short-  and long-term. Click here to sample Rick's Picks free for a week.

Someone declared in the forum that the long bond was tanking, but "correcting" is more accurate from a Hidden Pivot perspective. On the daily chart, based on the clear and compelling pattern shown, the March contract could come down to 143^16 without evincing even a whiff of bearishness. That would merely extend the tiresome series of ups and downs -- an apparent consolidation -- that has been dragging on since last summer.  Notice that a larger pattern shown in an inset allows a corrective move all the way down to 141^19.  As a practical matter, we’d need to watch things closely at that point, since any downtrend that exceeds an obscure and seemingly unimportant May 10 low at 142^18 would be bearishly impulsive on the daily chart.  Click here to sample Rick’s Picks free for a week, including daily trading ‘touts’ and access to a market-savvy chat room that goes round-the-clock.