Commentary for the Week of March 8

[The following was posted to the Rick’s Picks forum a while back, but I’m republishing it here because it makes some interesting points that deserve a wider audience. The author goes by the handle ‘Buster,’ and his argument is directed at another forum regular, Gary, who reflexively plays the role of Mr. Sunshine no matter how ugly the news or bearish the facts. RA] The government is not really trying to get the economy moving, at least not the real one. Government is trying to perpetuate a debt money system for the benefit of the relative few who gain from it long term. Since when has evicting millions of families after handing their creditors billions had a ‘real’ positive economic effect? I mean, what ‘real’ productive benefit have these people added to the economy other than the possible turnover of their homes to yet more sharks? Yes, this economic activity may add some numbers to GDP, but so would nuking NYC and rebuilding it again. Allowing millions of people to die from cancer needlessly is great for the drug business, too, for that matter, and their stock price, no doubt. Not so good for human beings and the real prosperity of society in reality, though. If the aim was really to get the economy moving, I can come up with a better solution in around five seconds: The infrastructure’s falling to bits everywhere. Why didn’t government just spend the trillions on rebuilding it, thus providing millions of jobs and wages to spend, and preventing millions of bankruptcies, too, with the opportunity for ordinary people to keep their debt payments up? America is rich in natural resources, so nearly all the spending would have been internal, so no real problem there. Better still, why doesn’t government print its own debt-free money

With a closet Marxist in the White House for four more years and the U.S. economy headed into something worse than recession, we should view any significant stock-market rally as a golden opportunity to bet against the house. Under the circumstances, yesterday’s 107-point tumescence in the Dow offered a tempting opening.  Not quite yet, though.  Our coldly mechanical technical indicators say stocks could go at least somewhat higher before they become engorged to the bursting point. Speaking more subjectively, any market-watcher with olfactories could tell you that the broad averages, currently hovering within easy distance of new all-time highs, stink worse than a clam's crotch. Consider the backdrop: taxes on income and investment are about to rise steeply; public spending outside of Washington is imploding; corporate earnings have been deflating since summer; new hiring will be asphyxiated by 2000 pages of Obamacare; and America's drug-induced housing "recovery" is about to breathe its last. That last item has been a source of hope and comfort for the Administration and Wall Street, but why should we, too, be comforted by a story that has been spun by thieves, mountebanks, liars, drop culls, arse bandits and worse? When you consider what went into creating the current real estate blip-let, you start to understand why it cannot go on indefinitely.  Sure, the Fed could continue to monetize mortgage securities at the rate of $40+ billion a month, and to warehouse mountains of worthless paper associated with untold inventories of vacant houses. Unfortunately for the spinmeisters, however, the supply of qualified buyers and re-fi seekers is certain to dry up well ahead of the economy’s impending crash. Heavy Supply Concerning the stock market, look at the Dow chart above and you can almost feel the weight of supply as each distributive rally has struggled harder

Let us say a prayer for Best Buy as the company attempts a daring overhaul. There is surprisingly good news on this front, and we’ll get to it in a moment. Suffice it to say, the stakes are extremely high, since failure could mean that ten years from now, quite a few of the things Americans buy other than food will necessarily come from Walmart, Costco and Amazon.  For USA shoppers used to limitless variety, this would be Bedford Falls without George Bailey. Bleak as that may sound, it hardly exaggerates the possible endgame of a trend that has seen vacated storefronts spread like a pox across America. Big-box operators in particular have been failing at an alarming rate, leaving gaping holes in strip malls and once-thriving city streets. The Great Indoors, Hollywood Video, Linens ’n Things,  K.B. Toys, Borders, Montgomery Ward and Woolworth’s were all household names that have vanished from the retail landscape if not yet from memory. Competition in the consumer electronics business in particular has been brutal, laying waste not only to CompUSA and Circuit City in recent years, but, before them, to Tweeter, Federated, The Wiz, Crazy Eddie, Incredible Universe, Musicland, The Good Guys and Computer City.  This is capitalism’s “creative destruction” at its most devastating, and it could continue to ravage the retail scene for years to come.  Just ponder the list of big-box survivors whose days could be numbered: Sears, Barnes & Noble, Bed Bath &  Beyond, JC Penney, Macy’s, Nordstrom, Office Depot, Office Max, Staples, Toys R Us, Blockbuster Video.  Sears, which has been dying since the 1980s, few will miss. But if two far better emporiums, Macy’s and Nordstrom, fail, we’ll all be buying pants the same way we now buy shirts: "One-size-fits-all-orangutans". The Good News… Now for the good news:

Apple shares recovered some of their old mojo with last week’s 10% rally, lending buoyancy to a market that was already pumped full of helium for Wall Street’s traditional observance of the Thanksgiving holiday. Nearly all of the stock’s gains came on a gap-up opening last Monday, but it is important to note that AAPL held onto those gains, consolidating over several days for, presumably, yet another burst in the week ahead.  Our immediate target is 580.92, which would represent a gain of $10 over Friday’s closing price. However, if buyers are able to push even slightly past that price target, they’d become an odds-on bet to continue to the next, at least, at 607.25. Both numbers are derived from our proprietary method, Hidden Pivot Analysis, and they leave us somewhat upbeat about the holiday shopping season.  Although we’re not expecting any sales records to be broken, business should be upbeat if Apple and a couple of other retail bellwethers merely maintain the status quo. One of those bellwethers is Fedex, a stock we watch closely for clues about the actual state of the economy. Five weeks ago, FDX’s charts looked so strong that we inferred that the U.S. would finish the year on a strong upswing.  However, in the weeks since, FDX has receded somewhat, suggesting that business will continue at a moderate pace, at least through December. Bullish on Facebook In the meantime, we hold bullish tracking positions in Google (just exited) and Facebook.  The former was initiated on a purely technical signal -- a “Hidden Pivot” correction target that worked very precisely.  In Facebook, the recommendation was based not on technical factors alone, but also on a gut feeling that the company has finally come up with a great new way to make money. We had been

Far from the world of leveraged finance and esoteric debt instruments, in the rugged hills of Tamworth, New Hampshire, is Hank Letarte’s White Gates Farm. It is a marvel of efficiency that serves to remind us city-folk of how a healthy, vibrant economy is supposed to work. Nothing is wasted at White Gates. The fuel that powers Letarte’s tractors and enriches his soil is homemade with ingredients scavenged from local providers. He uses cooking oil from restaurants to make diesel fuel. To warm greenhouses so that tomatoes fatten more quickly, Letarte extracts BTUs from a 15-foot-high pile of mulch. Coffee grounds from Dunkin' Donuts produce compost with a nice twist: the bears don’t care for it. A small plow has been fashioned from scrap metal salvaged from a heap of Army surplus. While visiting friends in Chocorua, New Hampshire, your editor got a four-star tour of White Gates Farm from Letarte, whose pork sausage is legendary at the local farmer’s market. The photos below show how very resourceful he must be in order to prosper.  “It’s a lousy way to make a living” Letarte confides, “but a great way to live.” *** Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. There is a substantial risk of loss in futures and option trading, and even experts can, and sometimes do, lose their proverbial shirts.  Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at

[And now it’s time for Mr. Obama to start paying for all those votes by reaching deep into our pockets. If you intend to avoid paying your “fair share,” however, please take note: There will be  few places to hide. For a gimlet-eyed view of what may lie in store for taxpayers and citizens of all political persuasions during the next four years, ponder the guest commentary below, from Wayne Siggard, a regular in the Rick’s Picks forum. RA] The election was all about new math:  47 = 51. The foresight and genius of the Founders knew no bounds.  Ben Franklin said, “Once the people find they can vote themselves money, that will herald the end of the republic.”  The trumpets have sounded.  The heralds have announced the awakening of the masses to that reality.  The greatest and most free nation the world has ever known has just sold its birthright for a mess of pottage; or, at least, the promise of an Obama phone. The takers have voted to take control over the producers. Everyone will now get a fair shot -- except that those who work in government and those who take government welfare will get a fairer shot.  Obama knows that you didn’t build that company.  You didn’t live frugally and save more money than your neighbor while they spent theirs on drugs or riotous living.  He knows this because he didn’t get anything without government assistance -- affirmative action put him ahead of more qualified people who earned a spot that he took, just like Elizabeth Warren. You couldn’t possibly have gotten anything on your own merit or hard work. A claim for material position can be met only by a government with totalitarian powers. – Friedrich von Hayek Von Mises said that full government control

[DaBoyz attempted to goose stocks in the final hour yesterday, though without much success. Perhaps this was because they had already sprung the same stupid trap on bulls earlier in the day with a short squeeze on the opening bar. Now, even if They manage to close stocks higher ahead of the weekend, the mood is unlikely to linger into next week, since most of the bellwether stocks mentioned below decisively breached fail-safe supports intraday. Apple, in case you're interested, did fall off the cliff, telegraphing a further plunge of nearly 5%, to 501.74, over the near term.  RA] A stall has turned into a power dive on Wall Street, with some bellwether stocks plummeting toward key supports flagged here just a short while ago. One of them, IBM, actually breached a “midpoint Hidden Pivot” support yesterday at 187.78, and that spells more trouble for investors. The actual low at 185.25 was not far beneath the 187.78 support, but the latter number should have held very precisely if the stock is to avoid yet more carnage. Under the circumstances, IBM looks primed to fall a further $8, to at least 177.56, before it has another chance to get traction. Meanwhile, Google, another stock whose year-end performance will weigh heavily on portfolio managers’ bonuses, relapsed to an important Hidden Pivot support of its own at 650.69. We’d drum-rolled a possible reversal from that number last week, and it came in the form of $20 rally from exactly 650.30.  But if Google were about to recover its mojo, the rally should have lasted perhaps 8-12 days. Instead, it appears to have petered out in just a day-and-a-half, strongly hinting of significantly lower prices to come.  Our minimum downside projection for the stock is now 605.83, a number you should jot down if you trade this

For gold investors, first the bad news – and let us be clear up front: it’s not really that bad.  Notice in the Comex chart below that the price of gold has been meandering within a pennant formation for more than a year. You don’t have to be a technician to see that this could comfortably continue for some time – well into 2014, perhaps – before the converging lines of the pennant will narrow sufficiently to force gold to “escape” either up or down. You can relax about which direction is the more likely, since the pattern so far looks like a classic consolidation, tipping the odds toward a breakout rather than a breakdown. However, our own proprietary tools (a.k.a. Hidden Pivot Analysis) suggest that it could be a while before the excitement begins.  This is implied by December Gold’s failure in October to surpass an important  peak at $1802 peak recorded seven months earlier, in March of 2012. Had the recent rally exceeded that peak, it would have created a bullish “impulse leg” of weekly-chart degree, clearing a path to at least $1976.  Alas, the rally chickened out just five points shy of impulsiveness, casting gold into corrective purgatory for an indefinite spell. A Rare Opportunity So what would it take to hasten bullion’s northbound exit from the pennant?  Here the news is good, for it would require nothing more than a measly $5 thrust that is uncorrected between 1798 and 1803.  Moreover, according to our technical runes, the thrust would not have to exceed the third peak at $1823 to signal a breakout with sufficient power to reach $1976 over the near term.  In fact, those familiar with our “camouflage” trading technique could conceivably be handed a rare opportunity to board with risk very tightly controlled if

[Monday's constipated price action changed nothing that was addressed in the commentary below. Perhaps with Veteran's Day, a national holiday not observed on Wall Street, behind us,  the markets will reveal a bit more about their post-election, pre-holiday mood as the week unfolds. RA] The broad averages and some bellwether stocks that we track achieved some important correction targets very precisely on Friday. Now, however, shares will have to rally robustly from the lows to avoid a further, possibly nasty drop into year’s end. A week ago, we used Hidden Pivot Analysis to drum-roll a potentially important low in Google at 650.69. On Friday, the stock bottomed at 650.30, just 39 cents beneath our target, then trampolined $18.  The powerful rally from exactly where we’d expected is a tentatively bullish sign. However, if GOOG should relapse beneath the support even slightly, more downside to at least 605.83 would become likely, according to our proprietary technical method. If this does indeed occur, the sooner it happens, the more bearish the implication would be for the remainder of 2012.  Because Google is so heavily owned by institutions and carries such heft in the Nasdaq index, any weakness in the stock could drag everything else down with it. We should mention that the S&Ps did almost exactly the same thing last week as GOOG.  With the E-Mini S&Ps having traded as high as 1431.75 a few days earlier, we projected a swoon from 1408.00 to at least 1364.25 -- a plunge equivalent to about 350 Dow points. This is in fact what occurred, just after we told subscribers to get  short at 1399.25. The actual low at 1363.50 on Friday came at 8:10 a.m. EST, about 80 minutes before the opening bell. The futures subsequently catapulted to an intraday high of 1388.00 before