Commentary for the Week of March 8

[Many who receive my free commentaries each day and who visit the Rick’s Picks forum to share their thoughts are unfamiliar with the forecasts and trading recommendations that only paying subscribers get to see.  I would strongly encourage ‘lurkers’ to try the service free for a week so that they might begin to appreciate the finer and more purposeful advice that lies behind the headlines.  Click here and Webmaster Mike will set you up for next week. Then read the following, a response to a post by ‘Gary L’ suggesting that my permabear bias may be clouding my judgment about trades and investments. RA] Gary, you haven’t taken the Hidden Pivot course, nor have you followed the detailed trading recommendations that I disseminate each day to paying subscribers, and so your impression of Rick’s Picks is likely to be based on the free commentary published daily at this site. However, and as any one of my subscribers would tell you, I focus obsessively on trading and forecasting strictly by-the-numbers. ‘Bullishness’ and ‘bearishness’ aside, for me and many ‘pivoteers,’ it all comes down to observing uptrending or downtrending impulse legs in different time frames. This very simple idea guided me unfailingly during a time when I might otherwise have stumbled badly. In the weekly column I wrote for the San Francisco Sunday Examiner years ago, I dissed the dot-com boom as it played out, never deviating from the shrill warning that this remarkable eruption of greed and stupidity would take many investors down with it. The Examiner’s readers must have seen me as Chicken Little (until the crash, that is). However, at that same time, the customized daily forecasts that I was selling to groups of floor traders on the CBOE and PSE made even Merrill Lynch’s analysts look like pessimists.

[Spring has sprung, the daffodils are blooming even here in Boulder, and meteorologists are saying that Punxsutawney Phil may have erred last month when he saw his shadow. If you’ve failed to notice all of this because the churlish tedium of Wall Street has occupied your days, then perhaps it’s time for a getaway. Consider the benefits thereof, described below. I have previously run this excerpt from Thomas Mann’s The Magic Mountain because it holds an epiphany concerning the way in which we experience, and later recall, the passage of time.  My very favorite selection from one of Western Civilization's greatest novels,  it can be found in the “Excursus on the Sense of Time” chapter. The translation is by H.T. Lowe-Porter. RA] “There is, after all, something peculiar about the process of habituating oneself in a new place, the often laborious fitting in and getting used, which one undertakes for its own sake, and of set purpose to break it all off as soon as it is complete, or not long thereafter, and to return to one's former state. It is an interval, an interlude, inserted, with the object of recreation, into the tenor of life's main concerns; its purpose the relief of the organism, which is perpetually busy at its task of self-renewal, and which was in danger, almost in process, of being vitiated, slowed down, relaxed by the bald monotony of its daily course. But what then is the cause of this relaxation, this slowing-down that takes place when one does the same thing for too long at a time? It is not so much physical or mental fatigue or exhaustion, for if that were the case, then complete rest would be the best restorative.  It is rather something psychical; it means that the perception of time tends,

It’s late Tuesday night and index futures are wafting higher, not so much propelled by buying as made temporarily weightless by the blissful absence of volume. The E-Mini S&Ps are trading 1405.00 at the moment after having failed to head-butt their way any higher than 1402.00 earlier in the day. This suggests DaBoyz are building momentum for a short-squeeze ahead of Wednesday’s opening. They’re bound to get help when existing home sales are released, since this particular datum has quite evidently been brought to heel by Team Obama 2012.  The near certainty of a bullish housing number raises the question of whether we should want to risk impeding a possible buying stampede with the short offer we’d placed earlier at 1412.75. The answer is a qualified yes, although no longer via a straight offer at that price with the usual micro-tight stop-loss. We’d originally recommended that tactic to Rick’s Picks subscribers, along with another, more challenging, “camouflage” entry strategy that would attempt to control risk even more tightly. The latter is generally a wise course to follow in situations where the trader could get blown out of the water for the mortal sin of having followed heart and mind rather than instinct. The three are rarely aligned, especially when stocks have spent the last three years climbing a wall of worry that might have seemed insurmountable to some.  But just as paranoids can have actual enemies, cynics who think bulls must be out of their minds can sometimes be right.  Without casting aspersions on those who have been doing the buying, the cynic might also point out that rising shares have been driven less by bulls than by a tidal swell of easy money purposed to…lift asset values.  And of course, cynics married to bullion would further note that the

Can anyone remember when Apple shares were trading for around four bucks? We can, because at the time, in 1997, we were so certain the company was headed for oblivion that we made it the subject of the weekly column we wrote for the Sunday San Francisco Examiner. Back then, it looked as though Apple had finally lost the battle for market share to Microsoft. This, despite the fact that Macs were superior to PCs in nearly every way save cost and, almost fatally, software development.  Even though Macs were the computer of choice outside of the workplace, and although students and users in creative fields were particularly loyal to the brand, by late 1997 Apple’s market share had slipped below 4 percent, down from 7 percent a year earlier. This placed the company eighth among U.S. computer manufacturers. “Think Different” was the company’s slogan then, but unless they did some out-of-the-box thinking themselves, there would be no future. Fast forward to today. Amid a swell of hubris on the announcement of a $2.65 quarterly dividend and a $10 billion stock buy-back plan, Apple shares finally cracked $600.  A $5,000 investment in 1997 would be worth $750,000 today.  We should have realized the company was bottoming when we were deluged with hate mail in the days after the Examiner column ran. Hell hath no fury, evidently, like a Mac user scorned.  While our essays ordinarily elicited no more than three or four dozen responses, this time hundreds of letters and e-mails poured in.  The milder ones merely assailed us for being blind to the Mac’s many virtues.  But quite a few implied that we’d burn in hell, or worse, for merely doubting that Apple would survive. Who could doubt they would with so many hard-core fans ready to come to

Late Sunday night, the Mini-S&Ps were butting up against a minor “Hidden Pivot” resistance at 1401.25 whose breach would suggest that yet another bullish surge lies immediately ahead. We’ve gotten so accustomed to seeing bears scramble for cover ahead of Monday morning’s opening that, in contrarian fashion, we’ve waxed increasingly cautious whenever it happens. In the current context, that means paying close attention to an E-Mini S&P  rally target not far above that has the potential to stop bulls dead in their tracks. [Click here for free access to the exact number.]  Notice that we are not guaranteeing that the Mother of All Bear Rallies is about to end. To the contrary, and as many of you will have surmised long ago, the odds will always be against those who would attempt to predict exactly when a rally that has been running more or less non-stop for years will seven-out. Even so, hope springs eternal that one of these days, U.S. stocks will lurch into realignment with darker realities rather than with the shameless propaganda requirements of an election year. In the meantime, please don’t get the idea that this kind of wishful thinking on our part is just sour grapes.  In fact, we were long and bullish on the E-Mini S&Ps as recently as last week after a trade triggered during one of our regular weekly online tutorial sessions. Over the short period we held the position, the futures didn’t get very far.  However, a modest rally allowed us to exit with a small paper profit, and we planned – still plan --- to reverse ourselves via a short if the futures hit the “magic number” alluded to above.  That number, as noted, is a “Hidden Pivot” as determined by our proprietary forecasting method, and it looks sufficiently compelling

Stocks broke out of a two-day holding pattern yesterday morning and then stalled, presumably to wait for that mote of benign economic news that can be relied on to stir up some short-covering. There wasn’t enough news on the tape yesterday to stir up much of anything, even by Wall Street’s liberal standards. Just an item suggesting that manufacturing in the New York region had “unexpectedly” increased, and another item that had the U.S. and Britain thinking about tapping the ol’ strategic oil reserves to help “calm” energy markets. Fortunately, however, from a trading standpoint, the day was hardly a wash for Rick’s Picks subscribers who attended the tutorial session that we give every Wednesday morning for graduates of the Hidden Pivot Webinar. (Click here for details concerning the  upcoming class, and get a $50 discount.) Students are advised to come to these classes ready to trade, and although we don’t always have an opportunity to pull the trigger during the sessions, a moderate breakout in the E-Mini S&P Thursday morning gave us good reason to act. The pattern we used to initiate a long position is highlighted in the chart above, and the means that we employed to leverage it is called “camouflage” trading. Essentially, this technique entails identifying very subtle breakouts that are likely to go unnoticed by conventional support-and-resistance traders. In this case, we had to zoom in on the 5-minute chart to find a precise “camo” rationale for getting long. Typically, we risk no more than five ticks theoretical, or $62.50, when we get long or short in the E-Mini S&P.  This trade called for a bit more -- $87.50, to be precise – and so we initiated the trade on one contract rather than the usual four. Because one student had purchased five contracts on

A U.S. banking system that is being held aloft solely by hot air and brazen lies took an ebullient leap toward November 6 yesterday with the release of an Administration-friendly Fed report declaring most banks sufficiently capitalized to weather severe adversity.  How severe? It’s hard to tell, since there were only passing references in the New York Times to a still-deflating housing market that has helped make The Great Recession and a plummeting standard of living an entrenched fact of life for most Americans, if not for their bankers. And nowhere in the front-page article was there even a word about the Fed’s warehousing of trillions of dollars’ worth of mortgage paper once held by the banks – debt paper that might never recover in value.  Under the circumstances, far from being healthy as the Fed and its shadowy masters would have us believe, the banks are afflicted with the financial equivalent of stage four cancer. Not that anyone on the Street would care to notice. In fact, with this week’s big stock market gains, Wall Street seems to be literally banking on the ability of the spinmeisters to hide the financial system’s deathly pallor with the skill of Sonny Corleone’s mortician. In the meantime, many on the Street, and even a contributor or two in the Rick’s Picks forum, were seeing cloudless skies at least till the election. “Money is going to be pouring into the stock market at the expense of other investments,” noted one forum regular, Gary L. “I now see the possibility of a 20 percent rise in the stock market year over year,” he continued. “If external factors don’t derail this trend, we are in a perfect sunny day lasting perhaps another nine months. This will make Obama’s chances of winning re-election an odds on

[We recently asked our friend Mario Cavolo, a frequent contributor to the Rick’s Picks forum, what it’s like from a cost-of-living standpoint to live in Shanghai. A New York City expatriate who lives and works in Shanghai himself as an entrepreneur, author, TV and radio personality, he graciously obliged with the guest commentary below. The fictitious diary is that of a middle-manager, Mr. Wang, who, like many of us in the U.S., struggles to make ends meet. RA] In this piece, we shall spend an imaginary and obviously unrealistic day in the life of a typical middle-class man living an ordinary life in Shanghai.  In the process, we shall come to better understand the typical costs associated with middle-class family life in today’s China.   Our “average Joe” is Mr. Wang, 30 years old, a white collar worker who might be an engineer, architect, human resources administrator or account manager. He is a middle-class professional who works for a large Chinese or multinational company, earning a salary of perhaps 4000-8000 renminbi ($670-$1340) per month plus a nice benefit package, and living “in the city” with his wife and brother. Note as well that if the Wang family lived in a secondary city such as Chengdu, Shenyang, Changchun and dozens of others, the local costs and prices noted would range 20% to 40% lower. For example, a taxi in Shanghai starts at 14rmb/$2.20, while in Shenyang they start at 8rmb/$1.40. Similar local apartment rents in a second-tier city are quite low, at 1500-2500rmb ($275-$450)/month for a 2-3 bedroom unit. Mr. Wang’s Rough Morning Sunrise greets our day once again, leading us out the door at 8 am. from Wang’s 900 square-foot, three-bedroom, fourth-floor walk-up which rents for 3000rmb/$500 per month. Mind you, that is pretty cheap, but only because Mr. Wang does

[Armed to the teeth with U.S. weapons, technology and training, Egypt’s military is the most formidable in the Middle East. This could become a major problem for the region, however, if the economic bog into which the country has been rapidly sinking triggers riots and political chaos. In the analysis below, Larry Amernick, savvy editor of The Amernick Letter, offers a fresh perspective as Egypt seeks to break with the West and forge a new, Islamic identity. RA] February 11 marked the first anniversary of the resignation of Hosni Mubarak. Mubarak's departure was encouraged by President Obama, who arrogantly remarked, "Egypt will never be the same!" Future U.S. presidents will spend much time and treasure undoing the damage that this administration has done to U.S.  Middle Eastern prestige and influence. Since Mubarak's ouster,  the Egyptian economy has disintegrated to the degree that foreign reserves are down 50% since January 2011. The local currency, the Egyptian pound, is likely to lose 15% to 20% of its value in 2012. Already, many middle class businessmen are substituting the U.S. dollar  for the beleaguered currency. The last two bond auctions by the government failed as buyers were reluctant to hold worthless Egyptian debt. The average yield on three-year notes rose to 15.91%. On the heels of these failed bond auctions, Standard & Poor’s lowered its long-term ratings on the National Bank of Egypt, Bank Misr, and the Commercial National Bank of Egypt to a "B" rating and further stated that its long-term view was negative on all three institutions. The National Bank is a state-owned entity so a downgrade on the bank is a proxy for a downgrade for the country. Corruption and plutocracy are so entrenched that the new Islamic regime will not be able to deliver on its promises for increased