-- Posted Wednesday, 7 November 2007 | Digg This Article
| Source: GoldSeek.com
Rick’s Picks
Wednesday, November 7, 2007
“Phenomenally accurate forecasts”
You don’t need to be a chartist to feel the weight the Dow Industrials have imposed on bulls of late. Imagine that the enhanced, red price bar is a surfer intent on paddling over the gathering swells. They are so high, however, that he would not be able to even see the top of the first, let alone the scary crests mounting behind it. Again, thinking visually, try to imagine the kind of energy it would take for the surfer to power over these towering breakers. Let yourself feel the crushing force they project to the right and downward. This is akin to the resistance stocks would have to overcome to achieve new recovery highs.
Our sense of things, visually speaking, is that the tidal crests of July and mid-October will prove too formidable to surmount. More to the point, and given the great unlikelihood of felicitous news about the economy these days, we doubt the Industrial Average can push above even such modest peaks as we find on the hourly chart, let alone the daunting heights of the “daily.” Accordingly, we have been a scale buyer of November Diamond puts even though there are no Hidden Pivot rally targets to buttress this strategy. Our more or less careless accumulation of put options at this time actualizes our strong gut feeling that there is very little buying power left – not even enough to trigger a old-fashioned, short-covering panic.
Yesterday, for instance, a perfunctory short-squeeze in the final hour left the Diamonds somewhat shy of a 136.76 target that had been broached in the chat room. The intraday high was 136.62, and although the implied 0.14-point differential may not sound like much, it was enough to suggest that bears are in no great hurry to thrown in the towel. Nor are we planning to do so ourselves. There is no stop-loss on the puts we already hold, and we will be adding to the position if shares continue to rise against all reason. We will also be accumulating far-out-of-the-money puts expiring in 2008 so that we’ll have ammo when shares finally plunge.
Absent a clear rally target, we have not bought puts like this, willy-nilly, in many years. But the time is now, we think, to prepare for the day when the stock market glimpses reality. That day cannot be far off.
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Kudlow-Watch
Our first few days of Kudlow-watching have yet to turn up even a single kind word. Surely the high-profile “economist” isn’t so widely reviled that none of you has anything good to say about him? While we await your further comments, and appeal to your sense of empathy, here are some more reflections from readers on Wall Street’s reigning shill:
He (aka, Scary Ludlow) is still a nonstop, totally unscrupulous cheerleader for [Wall Street]. There is one useful thing I have noticed: Now and then he seems to give off clues as to what "The Team" might be up to. These past few days, he had me wondering whether he might have caught wind of some kind of "Operation Dollar Rescue" in the works. We shall see. Vance in Denver
All I can say is that I hope he doesn't use a stop-loss on his long stock positions. If and when the market tanks, then I will tune in to Larry on a regular basis! Mike A.
You got him all wrong! Kudlow will tell you that there is no return on gold. He neglects to tell you that many of his picks also can boast of having no return --period! Ray O.
About a year ago Kudlow spoke regarding trade deficits (and I paraphrase): "The Arabs send us oil, we send them Treasury Bonds, what could be wrong with that?" I think he was serious. If Kudlow had been aboard the Titanic he would have reassured everyone that all was well, and that only a small percentage of the hull had actually been torn open -- and besides, excess liquidity can be a welcome thing. Then, he would sneak off, dress up like a woman, and slink into a lifeboat. Hal M.
GOLDILOCKS! GOLDILOCKS!!” 300 times per show, at a rate of five "GOLDILOCKS!" per minute, or one "GOLDILOCKS!" every 12 seconds. Thomas 412
I write a blog of my own about Gold and Silver and can't stand Larry Kudlow. Following the Fed's 50-point rate cut in September, I roasted him. Is it true that the guy worked his way thru the Permabull School of Economics in the late 60s as Bozo the Clown? Thanks for your work. Greg M.
I've watched Kudlow since he was tag-teaming with Cramer on their duo-host show a few years back. After all, it never hurts to hear how the enemy thinks. The attached photo [of an elephant evacuating his bowels] sums up my opinion of his "Goldilocks Economy" thesis. Canadian Dave
