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-- Posted Saturday, 8 February 2003 | Digg This Article
We’re headed bruisingly lower -- but then, I’m probably not telling you anything you weren’t feeling in your bones already. How much lower? The downside targets I’ve been using for the major indexes imply a fall of nearly 5 percent over the near term. But the DJIA objective at 7163.85 implied significantly worse – a fall of about 9 percent, or more than twice what I am expecting for the other averages. A careful search for hidden pivots associated with the Industrial Average has remedied this discrepancy, however, since it allowed me to identify a potential inflection point at 7467.65 that I hadn’t noticed earlier. (Those of you who have taken the E-mini course and want to corroborate this should start with the 10353 high that occurred last May.) This is almost precisely 5 percent below Friday’s close, 7864, and well in line with my forecasts for the S&Ps, the OEX and the Nasdaq 100. Respectively, my downside targets for those vehicles are 4.3%, 3.7% and 3.8% below current levels. If I am right, stocks are about to take a mild header, with the DJIA leading the way down. My specific targets are furnished below, and although they should be considered minimum objectives for the bearish cycle begun in August, they could conceivably provide a launching pad for a decent rally. I am confident about the DJIA target and expect it to work precisely, if at all. If it is exceeded by more than 3-4 points, however, I’d say "Look out below!" The assumption, as always, is that these targets are not chopped liver – that they always work, even when they are easily exceeded. I infer in such instances, not that I have miscalculated, but that the dominant trend is sufficiently strong to make short work of hidden pivot support and resistance points. Double-Dip Recipe In the "don’t-get-your-hopes-too-high" department, here’s an interesting note from our friend Bob Bronson at Bronson Capital Markets Research: "With the weak consumer and inventory figures and the trade figures, the Q4 2002 GDP figure could be as low as 0% or even slightly negative, whereas the Q1 '03 year-over-year comparison will be difficult, particularly due to the lack of pent-up demand and the prospects for saturation in the auto and housing sectors. Not only have Wall Streeters not priced in 2% or slower real GDP for '03, no growth or recession is completely off their radar screen, so to speak, and 3% or higher growth is the consensus. If I am correct about a 1%-2% real GDP trend for '03-'04 (and converging real and nominal GDP), the major stock indices and Treasury note/bond yields have much further to decline over the next ~12-16 months." [The + symbol means we have an open position, while $ means there is actionable advice.]
Gold
APR GOLD (370.50): The April contract appears to be consolidating at significantly higher levels than we’d anticipated. It could still drop to as low as 358.90 before embarking on a new surge, but we’d rule this out if the futures close even slightly higher today and tomorrow. A single-day close above 374.50 would probably set the next bullish cycle in motion.
GoldCorp (NYSE:GG) : Quote - Options - News - Profile - Message Board - Website
+ GG (12.16): Goldcorp is quietly biding it’s time in preparation for the next leap. A pullback to as low as 11.00 would be natural, but it may not be necessary. We hold 200 shares for an average 4.65, and no changes are contemplated. When the stock closes above 13.77, or trades more than six cents above that price intraday, we should assume it's bound for a longstanding target at 15.72.  
DURBAN DEEP (NasdaqSC:DROOY) : Quote - News - Profile - Message Board - Website
$ + DROOY (4.07): We hold 400 shares for an average 4.66. Today, bid 3.82 for 200 more shares.
RGLD (26.27): Stochastic indicators for the long-term charts are bending down from very overbought levels, so we are cautious about initiating a long position up here. That said, it would not be unusual for a stock in a powerful bull market to simply shrug off incipiently bearish stochastic influences and continue higher. Royal’s most recent top, at 28.80, fell within six cents of an important hidden pivot, but if that resistance is exceeded by even a penny, we’d look for the rally to continue to at least 34.23. DJIA (7864.23): As we’ve noted above, our minimum downside projection for the short term is to 7467.65, a hidden pivot, but if it’s decisively breached we’d expect the decline to continue to at least 7163.85. E-Mini S&Ps (830.25): Our minimum downside projection is still 793.75. No bear rally worthy of the name is likely to occur until that hidden pivot is touched. MAR 10-YEAR NOTE (114.110): I’m going to switch back to the 30-year Treasury for two reasons: I’m not getting any "vibes" from this contract; and, I have a gut feeling that Uncle Sam will start moving further out the yield curve to do his borrowing. We’ll make the switch in Tuesday’s edition, but for now my outlook is unchanged, as follows: The futures would need to close above 114.310 to suggest that a test of the important January 31 peak at 115.175 is likely. OEX (418.79): We are bearish for the near-term, with a minimum downside projection of 403.75. We’ll consider buying some call options if the target is reached in time to give us at least a six-day play in the February calls, or two weeks in the March series. Meanwhile, it would require a close today above 429.62 to trip a moderately bullish technical signal. QQQ (23.81): Yesterday’s low came within 0.26 points of our by-now-familiar target, 23.69. If the feeble bounce from that pivot cannot be sustained today, look for the cubes to continue their descent, to a minimum 23.23. You can bottom-fish there until the final hour with a 23.24 bid for a round lot, stop 23.19. Switch to a 15-cent trailing stop above 23.52, using 24.09 as a minimum objective. MAR NASDAQ 100 (959.50): No change. The fall from mid-January’s high just above 1100 still has a ways to go – to a minimum 924.50 if our pivot analysis is accurate. Stochastic influences are now delicately neutral, so the decline could accelerate if the Naz takes a fall today. *** IBM (77.10): Zzzzzzzzzzzzzzz. + CSCO (12.85): We hold sixteen Feb 17.50 calls (CYQBW) for 0.10. Friday’s low took out a mid-December bottom that we’d have expected to provide more support, solidifying the impression that this stock looks like hell. If it continues to fall, look for the stock to grope for support in the range 11-12. These are Cisco’s final days on the sheet, since we’ve replaced it with a bull-market mining stock, Royal Gold (see below). $ INTC (15.05): There’s an interesting-looking hidden pivot at 14.67 that could end Intel’s agonizing decline, at least for a while. If it is hit today, the February 15 calls (NQBC) would be a decent value at 0.30. Let’s bid there for two of them, contingent on the stock trading 14.64 or higher, day order. C (32.91): My minimum projection for the short-term bear cycle is 28.19, a hidden pivot that comes after diligent scrutiny of the weekly chart. I would not warrant this pivot as a high-confidence spot to go long against the trend, although I’m fairly confident it will be reached. + MSFT (46.58): We hold two Feb 60 calls (MSQBL) for 0.80 and four April 60 calls (MSQDL) for 0.80. What drudgery. We can only waiting for the rally that would help us short some February or March calls against those we already hold. + EBAY (72.37): We hold two Feb 75 calls for a 1.50 CREDIT as well as two March 80s for 1.20. Friday’s low at 71.63 came within 18 cents of fulfilling a 71.45 target, but that hidden pivot will remain viable today as our minimum price objective.
-- Posted Saturday, 8 February 2003 | Digg This Article
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