Commentary for the Week of March 8

The Dollar Index has blasted through key resistance at 80, threatening to “unwind” carry-traders who borrowed dollars for next to nothing in order to speculate on other assets. Chief among those assets is gold, which got savaged yesterday in a $100 selloff that seems hell-bent on testing September’s key low. The low lies at 1543, basis the Comex February contract, but we doubt that it will hold. In fact, earlier, we had told subscribers there was a 60% chance that February Gold was about to dive to at least 1459, a technical target derived from our proprietary Hidden Pivot Method.  We shall see. In any event, gold and silver –  as well as crude oil, the euro and the commodities complex-- will come under heavy selling pressure if the short-squeeze picks up steam. If you’d like access our specific price targets for all of these trading vehicles in the days ahead, click here for a free trial to Rick’s Picks. Concerning the U.S. dollar’s powerful surge, although it was driven initially by fears over the possible collapse of Europe’s financial house of cards, the rally has taken a life of its own that is being driven by dollar short-covering. The buying is not yet at panic levels, but a surge will be impossible to stop if it gains juyst a little more momentum. Although the central banks can affect the markets for a short while with talk of bailouts, all of them acting together are puny relative to the quadrillion-dollar juggernaut that is about to fuel an unwind of the dollar carry-trade. Over the years, we’ve written many times about this potential Mother of All Short Squeezes. The paradox was, and is, that the dollar is intrinsically worthless, a form of debt rather than money. In point of fact, as

We got short at the top on Friday, but how long will Mr. Market let us enjoy the ride? Our vehicle, QQQ put options, nearly ran off the road on Tuesday when the Dow began the day with a 125-point rally. A pullback in the early going shaved that gain by two-thirds, but by early afternoon bulls were beating on the highs, threatening to send bears into a new round of short-covering. The pessimists got a reprieve, however, when something spooked the market late in the session, sending the Industrial Average into a 225-point dive that left it 66 points lower on the day.  It was not a session for the faint-hearted. Still, the outcome boosted the value of our put position, leaving Rick’s Picks subscribers in good shape to try to lock in a profit no matter what the stock market does as 2011 draws to an unpredictable close. On Friday, we’d actually been bullish for most of the day in anticipation of a powerful rally in the E-Mini S&Ps to exactly 1259.25, a Hidden Pivot target. With ten minutes to go before the bell, the futures got as high as 1258.50, and so we sent a bulletin to subscribers telling them to get short by buying January 54 puts for 0.96 in QQQ. This equity-based vehicle corresponds to the S&P futures and was making its high at 57.17. Although we rarely advise opening a position on a Friday afternoon, the circumstances strongly warranted it. This time, taking a gamble paid off when the new week began. Monday’s gap-down opening caused our Jan 54 puts to spike to as high as 1.25, and so we told subscribers to take a profit on half the position. Now that the selling has resumed, our goal will be to spread off our

[The commentary below elicited quite a response, so I'm letting it run for a second day. Wednesday's commentary will feature two very important trading tips for permabears who have been trying for years without success to short the elusive Mother of All Tops. If you're interested in learning the "parlor trick" that we used on Friday to get short the QQQs ourselves within a hair of the intraday high, click here. And if you'd like to have these daily commentaries delivered to your e-mail box free of charge, as will as free access for a week to all of Rick's Picks services and feratures,  click here. RA] Who’d have believed that the word “hypothecation” would grab the financial world’s shakers and movers by the balls last week, whirl them round-and-round, then dash their cynical pretenses of “saving” Europe against a stone wall?  Click here to read the article on this topic at ZeroHedge if you haven’t done so already. And then send it to everyone you know. We did, with a warning that the collapse of the banking system is no longer merely possible or likely, but unavoidable. The article takes pains to explain why in terms that even the layman can understand. It will undoubtedly have created quite a stir not only among the broad readership of web sites that linked it, but among those charged with the task of further delaying Europe’s financial collapse. The spinmeisters and policymakers have been doing their utmost to obscure the details of the supposed rescue effort, since the better those efforts are understood, the more absurd they become. And yet, as our colleague Bill Buckler, editor of The Privateer, points out, the clamor to “solve” Europe’s debt problems with trillions of ginned-up printing-press euros or dollars is nearly universal.  One might think

Yesterday, Rick appeared on The Keiser Report. Rick and Max discussed Goldman's death dive and MF Global's crimes against the markets. Rick's segment begins 12 minutes and 55 seconds into the video.

This demo was done at the invitation of TradersLog.com and starts with a brief explanation of the Hidden Pivot Method. We then took a close look at some key charts that provide clues concerning how the global financial crisis might play out. Our focus was on long-term charts for T-Bonds, U.S. stocks, the dollar and the euro. The conclusions we drew are somewhat counterintuitive, most particularly a prediction that the euro will not crash when the PIIGs eventually default.

Have you taken a trading course -- or two, or three -- only to find yourself still struggling years later to achieve profitability?  Maybe you’re someone with virtually no knowledge of the stock market looking for an alternative source of income if the economy should crash. You could also be bored housewife keen on using your mornings more productively. Or a college grad with no job prospects…or a laid-off factory worker…or a Realtor worried about very tough times ahead. Or a Louisiana shrimper looking for an easier life. Or a guy who’s tired of living with his mother...or of being hounded by loan sharks. If so, Rick’s Picks invites you to apply for a full scholarship to the Hidden Pivot Webinar scheduled for January 11-12.  Three stipends worth $990 apiece will be awarded. However, this particular class, as well as the post-grad perks you’ll receive, will go beyond anything we’ve offered in the six years that the Hidden Pivot Method has been taught. You’ll receive intensive, one-on-one instruction with a single goal in mind: making you a successful trader. If you’re thinking “No way!” then you are exactly the kind of student we are looking for. Click here to nominate yourself or someone else you think could benefit. The deadline is December 29, and applicants who appear at least outwardly to be “bad” candidates for day-trading will receive first consideration. Winners will be notified by no later than January 4. The upcoming webinar will offer an additional, significant benefit: Everyone who takes it or who has taken the course in the past is invited to follow the rigorous training of the scholarship students each step of the way. You will be able to do so in real time if you choose, or via recordings of all of the individualized tutorial

Comex Gold has taken some wicked turns in recent days, none more promising than Tuesday’s 1705.70 low. We were looking to buy near there ourselves using a technically derived bid at 1702.60.  However, when the futures trampolined from a low that lay $3 above our bid, we came up empty-handed.  Even so, from a technical standpoint the price action was encouraging, since we regard any trend up or down that fails to reach its “Hidden Pivot” target as the last gasp of that trend.  In this case, under the rules of our proprietary forecasting and trading method, 1702.60 became the calculated ‘p’ midpoint support of the ABC pattern shown. Although we expected a very precise hit because the pattern itself was so clear and compelling, the fact that bears were unable to push the futures down to the target suggests they are tiring. But not quite down for the count. Before we assume this to be true, we require that the current rally create a bullish “impulse leg” on the hourly chart and continue to its ‘D’ target.  That means the futures will need to hit 1754.80 today, nearly $8 above yesterday’s high, to give bears reason to be nervous. As traders, however, we’ll be looking to jump on the February contract Wednesday night or Thursday on any rally that pokes above 1751.30, since that would generate a fresh “impulse leg” for February Gold on the hourly chart.  Under this scenario, the ideal trade entry would come following a pullback from a tick or two above 1751.30.  Any higher would make the breakout too obvious to too many, creating a traffic jam for bulls. The specific technique we use to leverage very subtle breakouts is called “camouflage.”  If you’d like to know more about this method, which can help reduce

No sooner had Merkel and Sarkozy put the finishing touches on the latest bailout rumors than Standard & Poor’s was threatening to downgrade the debt of 15 of the 17 euroland nations.  Recall that as the week began, France and Germany were talking up the latest supposed solution to the debt crisis.  Bigger and better than their last supposed solution, it drew a rave from that man of discernment and cunning, Tim Geithner, who pulled out all the stops in making much ado about nothing. “The eyes of the world are very much on Europe now,” he told reporters in Berlin.  "[We should be] very encouraged by developments in Europe in the past two weeks, including reform commitments in Italy, Spain and Greece.” Ahh, yes. Nothing like a little more austerity to resuscitate the economies of Europe’s deadbeats, right?  The prospect seems to have swayed no one at Standard & Poor’s, a firm that is out to prove to the world that it matters after having missed a hundred signs a few years ago that the banking system was in imminent danger of collapse.  The ratings agency has been doing its vengeful best to atone for the oversight, distancing itself from borrowers with whom it used to sleep around. The threatened downgrade would affect the long-term rating of Europe’s bailout fund, the European Financial Stability Facility. A decision reportedly is pending a review by S&P of the sovereign members’ books, and there’s a possibility that ratings could come down a couple of notches. That would put even more pressure on the ringmasters of Europe’s dog-and-pony show, including the U.S. Federal Reserve,  to counterpunch with sufficient easing to offset the increase in borrowing rates that would otherwise occur. A Mere Formality While an S&P downgrade would be a mere formality, it

As we went to press Monday night, February Gold was fixing to stop out a bullish position we’d advised that produced explosive, although perhaps fleeting, gains. For subscribers who acted on the initial recommendation made here last week, there was a theoretical profit of nearly $6000 per contract at recent highs near $1767. (Click here for a free pass to our daily recommendations and forecasts.)  But because we had resolved to stick with this bullish play and swing for the fences, we watched passively as bullion quotes receded back into the by-now-familiar muck of uncertainty. To be sure, our position will survive if the futures trade no lower than 1716.20. But we’re not counting on it.  And if gold were to trigger the stop-loss and continue south, the next place we might consider bottom-fishing would be near 1702.60, a “Hidden Pivot” support determined by our proprietary forecasting method. Would such a move portend corresponding weakness in the broad averages? It seems logical, since stocks and bullion have been moving in tandem, if not in lock-step, for months.  Most recently, however, shares have acted far stronger than bullion, suggesting the two might be decoupling. We doubt it, though. More likely, in our estimation, is that the 1000-point rally in the Dow since last Monday is about to reverse and take the precious-metals complex with it, at least for a spell. The rally, after all, was based on optimism over Europe’s latest bailout nostrums and on strong retail figures thus far for the holiday shopping season, but we don’t see either affecting a big picture that remains bleak. No Crystal Ball Even so, because we employ charts and not a crystal ball, we remain open to the possibility that the Dow has more upside potential over the near term. We gave the