Commentary for the Week of March 8

We hold two August 98 puts for 1.06 and four July 96 puts for 0.70.  Continue to offer four July 90 puts short for 1.40, good-till-canceled. The order is a longshot bet at the moment, but it could fill in a trice if a long squeeze develops before or immediately after the July 4 holiday. A dip below 101.29 in the early going this morning would be an encouraging sign.

Yesterday's downdraft was undeniably nasty, but it would take a print below 1216.20 today to make it officially worrisome. That's where the selloff would become bearishly impulsive on the daily chart, as shown in the inset. Keep in mind, therefore, that a breach of low #1, followed by a rally and subsequent breach of low#2, would imply short-term corrective action rather than the start of an intermediate-term downtrend. Most immediately, the futures will have a chance to turn from 1233.50, a midpoint pivot, or perhaps from its 'd' sibling at 1225.30.  They could also put bulls instantly on the offensive with an upthrust this morning exceeding 1244.40, a look-to-the-left peak from Monday recorded on the way down on the 1-minute chart.

Today and tomorrow, we will present two radical proposals for dealing with debt. The first, argued below by Ben Rositas, a frequent contributor to the Rick’s Picks forum, would redistribute America’s official store of gold bullion to all who are owed on behalf of all who owe.  The second, from another forum regular, Rich Cash, would wipe the slate clean via a return to Biblical Jubilee or something like it. Although we’ll concede that neither idea is even remotely feasible politically, consider the alternative: a debt deflation that locks the economy into a grinding Depression for the next twenty years. One thing is absolutely certain: Given that Americans are collectively on the hook for hundreds of trillions of dollars worth of obligations of all kinds, those who are owed are never going to be paid off in hard dollars anyway. And we are not talking about just banks and mortgage lenders who will ultimately have to settle for pennies on the dollar, but about the scores of millions of Americans who will find the till empty when it comes time to draw on Social Security, Medicare and all the other Ponzi schemes run by Big Government. Let’s Screw Ourselves Under the circumstances, why not simply screw ourselves now, deliberately and with constructive purpose, so that we can enjoy the benefits of being economically unencumbered as Americans have not been since before the creation of the IRS and the Federal Reserve nearly a century ago?  This might even return the banks to their original role of taking deposits and lending them to worthy businesses.  Indeed, if the five biggest banks in America were to go out of business tomorrow, we would probably get along beautifully without them, much as we would probably thrive personally and economically without the egregiously misguided efforts

Let me reiterate the 18.39 downside target first broached here a while back.  That's where BP is going at a minimum, and it is the Hidden Pivot target of a long-term trend off the weekly chart. A lesser pattern implies 18.05, suggesting we'll be able to do some bottom-fishing within a fairly narrow range just above 18.00. In the meantime, the stock's down(fall) has been too brutal for easy shorting along the way down, although it's still possible to squeeze off a low-risk shot intraday if you play close heed to a-b impulse legs on the 5-minute chart. _____ UPDATE (July 9): BP's two-week rally is just shy of invalidating the 18.39 target.  That would take a move above 34.46 -- point 'C', recorded June 11 on the way down; the so-far recovery high has been 33.90.

Silver has been routinely exceeding our bullish benchmarks on the lesser chart, so perhaps it's a good time to reiterate a 21.53 target that comes from the weekly (A=12.665 in  July 2009).  The sibling midpoint of that Hidden Pivot lies at 18.150, so any pullback to that price should be viewed as a possible buying opportunity, although entry should be made using camouflage within a minor uptrend rather than via a mechanical bid at the pivot.

All signs were "go" as trading drew to a close on Friday, with a Hidden Pivot at 1272.60 still our minimum objective for the near term. If the futures trade more than 0.50 above that number intraday, however, or close above it, you can be confident that the rally will continue to at least 1293.50. The pullback from that last Hidden Pivot should be precise because its sibling at 1230.75 has already shown precise stopping power. Accordingly, if you plan to adjust your long position or take partial profits, don't assume that an instant test of resistance at 1300 is a done deal merely because the futures have pushed above 1290. _______ UPDATE 1:40 p.m. EDT):  Yet another gratuitous shakedown, and it's enough to make one wonder whether these orchestrated selloffs need to be so brutal just to make a point. The drop was close to $30, and it created a nasty impulse leg on the hourly chart. The low so far has been 1235.90, but the selling would need to hit 1216.10 before Wednesday to become impulsive on the daily chart.  For what it's worth, the mini-avalanche was telegraphed to some extent by the failure of the intraday high to surpass a secondary peak at 1264.80 recorded on June 21.  I remarked on this in the chat room when gold was down just $5, but I did not imagine the severity of the selling that was yet to come.

June's three-week slide is bearishly impulsive on the daily chart, but there's not enough clarity on the intraday charts to map out the swing lows DXY is likely to carve out on the way down. My guess is that the next big leg will achieve a minimum 83.86, an approximately 2.3%  fall from these levels.  If so, the crucial midpoint support lies at 85.14, and a bounce off it would tend to corroborate the target itself.  _______ UPDATE (9:58 a.m. EDT):  DXY has bounced from 85.21 -- close enough to the midpoint support for us to infer that the Hidden Pivots are working.  A decisive breach of 85.14 should therefore be regarded as a warning of an imminent fall to 83.36.

It's difficult to recall a Sunday night when the futures were not being squeezed higher.  This con-job is pretty lame, though, at least so far, and it will need to get past a midpoint resistance at 1078.50 in any event to open a path to 1086.25, its sibling midpoint. Camouflage for the bull trade will be tough to find, since Friday's end-of-day rally has been in a shallow consolidation since, but you can short 1086.25 with a stop-loss as tight as 1.00 point. _______ UPDATE (10:04 a.m. EDT): The futures faked their way to 1079.75 overnight, exceeding the midpoint resistance noted above by 1.25 points. We'll categorize it as a midpoint failure nonetheless -- close enough for government work. The pullback has been feeble so far, however, suggesting that sellers and short-coverers will spend most or all of the day thumb-wrestling.

For spin-free analysis of the global economy, the Australia-based  The Privateer is one of our favorite reads. Amidst a cacophony of hubris and unwarranted optimism, its editor, William Buckler, provides a fact-filled perspective that reduces the mainstream media’s reports of “recovery” to drivel. Buckler notes drily that “the signs that the party is indeed almost over are all around us and becoming very difficult to ignore.”  The same goes for the U.S. dollar. When Nixon cut off foreign holders from redeeming dollars for gold in 1971, says Buckler, the U.S. initiated a reckless global experiment with fiat paper. “Forty years later, the bill for this adventure has come due,” he warns, “and there is nobody to pay for it.” Like Rick’s Picks, The Privateer regularly finds something to amuse in mainstream-news headlines on the topic of the economy. Here’s one that caught his eye -- and ours as well: “China Makes Good on Flexibility Vow – Yuan Falls”. As if any of the central banks actually support flexible markets. If it had been Hitler’s invasion of Poland that was being reported, the headline might have read, “Hitler Makes Good on Vow to Seek More Room for Germany”. Ominous Signs Recall that U.S. stocks got barely any lift from the news.  Abetted by short sellers caught on the ropes last Sunday night, DaBoyz and their pigeons were able to pretend for only a few hours that China’s decision to let the yuan rise was good news. Stocks all around the world rallied sharply if fleetingly, but by Monday morning most traders seem to have figured out that a pricier yen would subject global financial markets, particularly the U.S. dollar, to killing stress. The Dow Industrials fell steadily for the rest of the week, failing to attract even one decent short-squeeze rally the