Commentary for the Week of March 8

We’ve been known to keep odd hours, which, depending on the circumstances, can be good or bad when attempting to earn one’s daily bread trading. Sometimes it seems as though the best opportunities -- meaning the ones that produce quick and easy gains with relatively little stress – occur in the dead of night. At other times, especially in the first hour or so after the opening bell, the low-hanging fruit positively beckons those who are able to stay cool while most other traders, too scared to act, are waiting for the dust to settle. We love it when the action is heated – wild, even -- since this tends to drive most other traders to the sidelines. Let them sit on their thumbs, as far as we’re concerned – it just means easier pickings for us.  When things get moving, the Hidden Pivot Method that we use to trade and forecast is especially good at identifying the “filet” of uptrends and downtrends. As such, the terms bullish or bearish apply only to the extent that the “impulse legs” that drive these trends are headed higher, or lower, in a given time frame. A Silver trade that we put out to subscribers Wednesday night implictly required them to pay close attention to impulse legs on the very lesser charts. Here’s what we advised (and keep in mind that although the jargon is technical, it is geared to the many hundreds of subscribers who have taken the Hidden Pivot Course):  “March Silver appears to be building thrust for a shot at 35.535, the ‘D’ target of the pattern shown in the thumbnail mini-inset.  The 34.235 midpoint resistance that would need to be surpassed first is above Tuesday’s spike high, so we’ll  need to make our move below that level, camouflage-style, if

Natural Gas futures were trading for around 3.58 in November when we projected a possible bear-market low at $2.30. Imagine our excitement when, ten days ago, on January 23, the March futures contract trampolined from within exactly 1.6 cents of our target, shattering the despair and deathly calm of a relentless, multiyear sinking spell that had not seen respite since last spring. The initial leap was enormous, to 2.63, and anyone who bought down around the target would have reaped a $3400 profit per contract on the first day of the move. We had prepared subscribers for a potentially tradable bounce, reiterating our contrary stance on January 12 with this advice:  The futures were barely able to muster a dead-cat bounce on that last effort.  Even so, the 2.305 will remain a good place to try bottom-fishing aggressively with our habitual penny-ante stop-loss. At the time, the futures had been falling, falling, falling, but they were still well above our target, trading around 2.80. However, the next week saw them plunge, kamikaze-style, precisely to the Hidden Pivot support where we had anticipated a turn. In tracking our own recommendations, we never assume subscribers are making money merely because a trade that we advised triggered. In this case, a subscriber reported in the Rick’s Picks chat room (click here to access this 24/7 service free for a week) that he had indeed bought some contracts at the 2.30 target. And so we established a “tracking position” to guide him and any other subscribers who had caught the low.  In the ensuing days, the steep rally continued, peaking on January 26 at $2.84. At that point, each contract purchased would have racked up gains of about $5400 before commissions. We advised partial-profit taking that effectively reduced the cost basis on the 25%

Although we’d be thrilled to be able to brag a year from now that a trade we recently advised in Natural Gas futures caught a bear-market low within two cents, we’re not prepared to bet the farm on it. Similarly, a winning gold trade that got stopped out earlier in the week may have caused us to miss a moon shot, but we’re not about to look back. For when all is said and done, we’d rather not be prayerfully holding our breath or losing sleep as gold in particular swoons, leaps, caroms and careens its way higher. Aggravation and stress aside, on a simple risk:reward basis there is never justification for buy-and-hold speculation. Yeah, we’ve heard the story about the commodity whiz who made $50 million riding a brahma bull in soybeans/cattle futures/crude oil all the way to the top. But the guy couldn’t possibly have made all of that money without experiencing devastating setbacks along the way. And he could not have kept doubling down on subsequent trades without giving it all back. In our book, it is slowly but surely that wins the race, and the massage we preach to subscribers and students who take the Hidden Pivot Course is to never risk more than $1 to make $3. This applies along the entire route of a trade, from entry to exit. Moreover, we recommend that positions be constantly  “worked” so that s trader’s hard-won gains will not be entirely and constantly at risk. How does that advice relate to the chart above?  To begin with, when we advised buying eight gold contracts in two places below current levels, we “knew” exactly how much we stood to make on the trade because our proprietary technical indicators said a 1771.50 target would be reached come hell or high

Sometimes it's impossible to tell whether the financiers and politicians who carry water for the central banks are bad liars or just clueless dolts. A bureaucrat from the U.K. surfaced in the Wall Street Journal over the weekend, exhaling what seemed to us an ostentatious sigh of relief over the supposed success of the European Central Bank’s latest loan program: “[It provides] a very significant degree of breathing space to banks.” Yeah, sure. A very significant degree --- as though the banking system’s terminally decaying colossus were not in danger of imploding tomorrow -- and for no greater reason, possibly, than that some hapless bank clerk erroneously misplaced a decimal point. The bureaucrat's remark appeared, with unintended irony, in a story about how European banks are in a quandary over how to redeploy a torrent of digital cash that has recently come their way from the ECB’s magical credit-infindibulator. Recall that the banks sucked up €489 billion ($641 billion) in a matter of weeks after the ECB made that sum available to them in December for three years on super-easy terms. But what to do with it all?  None of them are in the mood to lend to – heaven forbid! --  businesses, and that leaves only two bad alternatives: using the digital money to buy government bonds from the sordid likes of Greece, Italy and Spain; or hoarding it at a loss. A loss?  Well, it turns out that although the ECB is charging commercial banks a nominal rate of 1% to borrow as much as their greedy little hearts desire, the central bank is paying them only 0.25% on overnight deposits.  Call us cynical, but we can’t see how the growing asymmetry of this relationship will produce a solution to Europe’s debt problems. In fact, it reminds us

For breathtakingly stupid political ideas and catastrophic “solutions” to America’s biggest problems, it’s hard to beat the New York Times op-ed page.  There, joined by such jihadists of the Left as Frank Rich and Maureen Dowd, resides the peerlessly wrong-headed economist Paul Krugman, whose Nobel Prize was as well-deserved as the one Yasser Arafat received for helping to bring Peace to the world. Until yesterday, we might have thought Krugman had cornered the market for the absolute worst ideas on how to revive the economy. Here’s a guy who actually seems to believe, in his heart of hearts, that the reason this has not yet occurred is that the central banks of Europe, the U.S. and Japan have not thrown enough money at the problem. We stopped counting stimulus dollars and guarantees ourselves when the total hit $15 trillion a couple of years ago. That was long after we’d become convinced that deficit spending in such cosmic quantities, far from reviving the economy, would ultimately bury the U.S. in debt. As it has.  Such concerns pose no problem for Krugman, however, since he simply avoids using the word “debt” in his Martian-friendly economic essays. There are so many world-class crackpots in Krugman’s chosen field that it was all but inevitable a colleague would surface to challenge him for the top spot in the Dismal Science Hall of Shame. Enter one James A. Wilcox,  author of an op-ed piece on Wednesday that purported to offer  “A Way to Make People Buy Homes Again”.  Wilcox, a professor at Berkeley, of all places, says all that's needed to jump-start the residential real estate market is government mortgage insurance. Specifically, he suggests a one-time premium equal to one percent on the home’s purchase price, or $2000 for a house selling for $200,000.  At the

We’re not keen on market alerts, dear readers, because you probably have far too many of them to sift through already, each with a different and sometimes deliberately outrageous point of view. Even so, we should like to caution you that recent, coincident tops in Comex Gold and the S&P 500 are best not ignored. Although we remain bullish on both of these vehicles, you can infer that the yellow flag is out. This means that bullion and the broad indexes will be receiving more scrutiny than usual in the days and weeks ahead, so that Rick’s Picks subscribers will be better prepared to dodge the avalanche that is increasingly a possibility. Our specific predictions, disseminated to subscribers in the form of daily “Trading Touts,” had called for a shortable top at 1316.75 in the E-Mini S&P, and at 1681.50 in Comex March Gold. In the actual event, the recent high in Gold occurred at 1681.80, three ticks from our target; and in the E-Mini at 1318.25, six ticks from our target. These targets were derived from our proprietary Hidden Pivot Method, and although they are intended for traders, they can also be quite useful for purposes of forecasting. In this case, if the E-Mini S&P were to rip through the recent high within the next day or two, it would imply that bulls have the power to drive stocks significantly higher. Any sign of this would shift our attention toward a 13085 Hidden Pivot target identified earlier for the Dow Industrials. That’s 409 points above current levels – a good week on Wall Street, although it could take a bit longer, or even abort, if Europe’s financial problems return to prominence in the news. Why "Abort"? Why "abort"? For starters, euroheadlines such as yesterday’s – that Greece and its

Talk of economic recovery is surfacing even in the Rick’s Picks forum, and so it’s probably a good time to consider why the very notion of a sustained recovery is factually unsupportable. It’s not hard to fathom why sightings of supposed economic green shoots have returned like kudzu in recent weeks.  For one, Europe’s slow-motion collapse has been put on hold by an all-out effort by the central banks to suppress sovereign borrowing rates. This is being accomplished through “swaps” that allow the European Central Bank to exchange unlimited quantities of euros for Fed dollars for a nominal charge of 50 basis points.  In effect, U.S.- style monetization is being surreptitiously applied to paper over Europe’s debt problem. For two, with the Fed artificially holding mortgage rates near all-time lows, home sales – although, significantly, not home prices – are staging a dead-cat bounce.  And for three, the endless election campaign has provided comic distraction for a nation terminally fatigued by real news. The news media are undoubtedly relieved to be able to report the meaningless details of an endless campaign because it frees reporters and editors from having to tackle more challenging subjects. (Full disclosure: Your editor was a newspaper editor and reporter for seven years.) Contrary to the brazen, hopey-changey lies being served up by the bankers, politicians and a news media too lazy, ignorant and conventional in its thinking to report that the emperor is wearing no clothes, here are some reasons why the U.S. economy is not only not recovering, but why it cannot  recover without a wrenching shakeout at least equal in severity to the Great Depression: Europe cannot possibly grow its way out of the hole. Only bankruptcy or hyperinflation can extinguish debts that have grown beyond servicing, let alone repayment. The same goes

[We wrote the following column for the Sunday San Francisco Examiner a month before the dot-com bubble burst in March 2000. Overnight zillionaires were a dime a dozen back then because countless investors couldn’t wait to pay practically anything for the shares of unproven companies. Nowadays, billion-dollar scores on Wall Street are much rarer, but as the lucrative IPOs last year for LinkedIn and a few other purveyors of Vaporware II demonstrated, enough greed and stupidity still remain to make canny stock-promoters rich. RA] It's said we are separated from the rich, the powerful and the famous by a chain of no more than six friends of friends. This means that if you are looking for a job in the White House, or a way to meet Winona Ryder, it should take no more than half-a-dozen phone calls to get in the door. But I'm beginning to wonder whether it would take even that many calls, on average, to reach a friend of a friend with eight-figure net worth. There seem to be so many of them around these days. More than lottery jackpot winners, as far as I can tell. Although I personally know a dozen guys who have reaped spectacular riches from stocks in the last few years, I've only known one big-time lottery winner in my life — "Bunky" W., who wrestled heavyweight for Atlantic City High School in 1967. Bunky hit the New Jersey lottery for $1 million, which made him a celebrity at our thirtieth reunion, held at Trump's Casino in the summer of 1997. But these days, with Wall Street's IPO boom sprouting megamillionaires like dandelions in May, a story like Bunky's would barely raise an eyebrow at the next reunion. Arthur’s would, though. He is a childhood friend and among the brightest students

We’d almost lost track of Europe since the newspapers went mum on the subject in late December, after auction rates for Spanish and Italian debt receded sharply from the 7% threshold. That’s officially the danger zone, at least to the extent that the business pages usually headline the story, albeit on an inside page. And now, in an apparent effort to keep all of us euroskeptics off balance, news sources often refrain from mentioning certain auction details, including the specific rate demanded by lenders.  Here, for example, is an everything’s-coming-up-roses story from a Wall Street Journal report that ran yesterday under the sunshiney headline Europe Debt Auctions Find Demand: “Spain sold 4.88 billion euros in 12-month and 18-month treasury bills amid strong demand, at interest rates well below those at its previous auction [emphasis ours]. It’s hard to say whether the Journal was being coy. To give them the benefit of the doubt, it’s possible the paper’s editors made a decision to downplay the mention of specific rates because the rates have been fluctuating so wildly in recent months as to be meaningless. Perhaps. For the record, we believe that anything above 2% subjects sovereign borrowers to a deflationary burden capable of snuffing the life from an economy. So how have the PIIGS managed to survive nonetheless? Answer:  They haven’t. Fiscally and economically speaking, they are all Dead Countries Walking. But it seems clear that they will be able to continue to borrow at rates that imply the near absence of risk. That’s because the local banks that are sucking up all of the paper, most of it short-dated and backed by “full faith and credit” boilerplate, are so flush with cash that they don’t know what to do with it all. A Dutch banker succinctly summed up the auction