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Alt 01.12.2002, 10:09   #1
RIVA
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Achtung Rick Ackerman - Market Wise Blackbox - börsentäglich neu. Startausgabe: 02.12.2002

A Stock-Picker's Lament
by Rick Ackerman

I took up technical analysis many years ago because I was such a mediocre stock-picker. Over time, I've held more than my fair share of stinkers, including a few that went belly-up. There were some stellar performers of course, like EMC and Siebel Systems, but overall the gains got averaged down to mere respectability when such swan-divers as Beta Natural Gas, Altec Lansing, Ecogen and Work Flow Systems were figured in. Now it looks as though I'll need another doubler to offset my latest misadventure, Aquila.

I mentioned the other day that although I hold no stocks for investment purposes, my kids have shares in a few companies. One of those companies is the aforementioned Aquila, a Kansas City, Missouri, company that used to be a stodgy operator of electricity and natural gas distribution networks in the U.S., Canada, the United Kingdom and Australia, as well as power generation assets. Not conten t with such prosaic business, Aquila evidently borrowed Enron's business model in an abortive attempt to become an energy-trading Master of the Universe. Like Enron, the company made fervent believers of investors for a short while.

The erstwhile rubes obliged by boosting the company's share price by more than 150 percent over a 14-months period that started in early 2000. The stock peaked just below $38, but my story -- my kids' story, too -- began a few months ago as a bottom-fishing expedition near $3.50 a share. How much could I/the kids lose, right? Well, for starters, nearly half of the initial stake. That was about where things stood with the stock trading at $1.78 shortly after the company announced it was suspending the dividend on its common shares. Aquila has rebounded smartly since -- all the way top $2.16, leaving me/the kids in the same position as millions of other investors: needing for the stock to rally 75 percent just to get me/us out even.

Say one th ing for Aquila's directors, they didn't try to sugar coat the news. Here's how CEO Richard C. Green Jr. opened his Q3 letter to shareholders: "For Aquila, the past quarter was just plain ugly. In fact, in our press release I refer to this entire year as 'a disaster.' From your letters, calls and e-mails received over the past few months, I already know that you fully agree with this description." What bracing candor! How many CEOs can we recall having used the word "disaster" in a letter to investors? Would that our Fed Chairman were so plain-speaking! It's letters like the one quoted above that fortify us for whatever rough times lie ahead. I've decided to hold Aquila come hell or high water, in hopes the firm will return to the mundane business that made it a reliable winner in the pre-Enron days. When the stock is trading for eight bucks a few years down the road, then will I tell the kids about how patience is the key to successful investing.
_______________________________________________________________________________

[The + symbol means we have an open position, while $ means there is actionable advice.]

$ DJIA (8896.09): We'll modify Friday's bullish benchmarks so that they are somewhat less ambitious: The closest hidden-pivot obstacle lies at 8907.81, but if the Dow can close above it, or trade above 8931 intraday, we'd expect the rally continue to at least 9145.45. If that last number is reached before the final two hours of the session, you can short a mini-contract there at your complete discretion.

DEC S&Ps (936.00): Friday's close above a 933.20 pivot implies the futures are on their way to 955.70. If they can close above that price (it raises the bar from a previous 952.00) for two consecutive days, we'd infer that a rally to at least 1007.20 has become an odds-on bet.

OEX (478.85): Friday's close slightly exceeded a 478.07 hidden pivot, but if the OEX is holding above it after the first hour of trad ing, we'd infer it's on its way to at least 489.81. Any print even slightly above that last number would imply a minimum 499.67 for this rally cycle.

DEC BONDS (109.06): The futures would need to print 111.02 within the next two days to get out of short-term jeopardy; otherwise we see a test of support near 107, where they made an important bottom in late October. If it does not hold, the December contract could fall to as low as 105.09 over the next three weeks. If this occurs, we would need to revise our long-term bullish outlook, which has seen the action between 107-115 as consolidation for a possible moon shot to 120+.

$ QQQ (27.72): The intraday top at 28.29 fell 0.06 points shy of a minor hidden-pivot resistance, but if it's breached even slightly, it would portend a rally to at least 29.81. Let's try to short up there by buying some December 29 puts. Bid 0.70 for two, contingent on the Cubes trading 29.99 or lower. Our bid is tantamount to th ievery, so it should be close to where the market makers are bidding the puts if the QQQs are trading near 29.81.

FEB GOLD (317.80): By closing below a hidden pivot at 318.10, the Feb contract signaled possible weakness ahead, with a worst-case downside target of 310.00 over the next 3-4 weeks. They'd need to pierce 326.20 to get out of immediate jeopardy.

DEC NASDAQ 100: (1117.00): There's a hidden pivot at 1141.50 that will serve once again as our minimum upside target. You can short an E-Mini contract at 1141.40, stop 1142.20, in the first hour, but you'll be on your own thereafter.

***

AOL (16.37): Our upside target is still 16.99, fractionally above Friday's high. It will remain viable so long as 15.24 is not penetrated to the downside. The target is too close to the round number to yield much of an edge for shorts.

$ + CSCO (14.92): We hold four Jan 12.50 puts (CYQMV) for 0.35. We'll continue to offer four Dec 12.50 puts (CYQXV) against them for 0.25, g-t-c.

INTC (20.88): No change. Intel appears bound for 23, the lower threshold of a huge, bearish gap it left on the charts in early June.

$ C (38.88): No change. Our minimum upside projection is still to 40.24. The target will make a good short if it is hit on a spiky rally, so let's offer 200 shares there, stop 40.34, good in the first two hours.

+ GG (9.95): We hold 200 shares for an average 4.35. It will take a two-day close above 10.99 to trigger a powerful rally. Stochastic signs still look moderately supportive, but a negative close today and perhaps tomorrow would bend them bearish for the near term.

+ DROOY (3.12): We own 600 shares for an average 4.29. Any bout of serious weakness should be expected to bring DROOY down to a hidden pivot at 2.89, since support near $3 has gotten pounded during the last month.

$ + MSFT (57.68): No change. We hold two Dec 60 calls for $1. There's a hidden pivot at 60.22 that will serve as our minimum upside target for now. Let's try to backspread our position by offering 100 shares short of 60.19, g-t-c. This trade is only for those who own two December 60 calls.

+ EBAY (68.92): We hold two December 75 calls (QXBLO) for 0.40 and we're offering a hundred shares short at 71.98 as a backspread hedge. That's 11 cents shy of our current minimum objective, 72.09, a hidden pivot.
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Alt 03.12.2002, 08:15   #2
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A Bear Sees More Upside
by Rick Ackerman

We recently heard from Rusty Stratton, a Black Box subscriber who is the only technician I know who was very bearish almost until the day the market turned with a vengeance on October 10. He’s still bullish but ready to pivot on a dime again if his indicators should flash red. “Make no mistake, this rally does not change the fact that we remain in a structural bear market,” he writes. “But after punishing the longs for most of this year, the shorts are getting their comeuppance. So what else is new. The markets and stocks in particular always give and take, with the market taking from whoever wishes to remain fixed in his opinion, or influenced by the opinions, lies, deceits, mistruths, half- truths, mista kes, misconceptions and misperceptions of others (i.e., the fundamentalists).

”Now we have journalists, TV commentators and fundamentalists galore declaiming points of view -- and they can provide evidence to persuade they are right. But I'm reminded of the only salient fact I remember from my Statistics 101 class four decades ago: Figures lie and liars figure. Which is which? Who cares? While I am occasionally exposed to the gibberish, I can choose to ignore whatever is not supported by the dispassionate tools that have no ulterior motive and no cause for misrepresentation. Sooner or later my short term anticipators will turn down, and sooner or later after that my intermediate anticipators will turn down. Later, the fundamentalists will discover the same.

So what is Rusty doing about it? “For now, with the exception of a couple of your long plays, I'm mostly in cash, taking intraday trades until I can better gauge where next month will head. But the Bullish Percent Charts are all bullish. In fact, most sector Bullish Percent Charts have now turned bullish while still under the 50% on buy signal territory. This indicates that a significant gain from these levels would not be unreasonable, despite all the talk about the market being ‘overbought’ “

As you may have inferred, Rusty and I are in close acccord these days. Although we remain open-minded to trading from the long side, we are highly skeptical that bulls are going to be right over the longer term. The important thing to understand is that being right about the big picture does not much matter. We are traders not investors, after all, and profits will come just as easily from rallies as from declines.

__________________________________________________________________________________

[The + symbol means we have an open position, while $ means there is actionable advice.]

DJIA (8862.57): Monday’s sharp selloff reversed a flaky, opening-hour rally before eating up half of last Wednesday’s equally flaky gains too. We’ll bring pivot-price speculation to today’s analysis, since it’s the only tool I’ve got that’s inured to the psychoses of news-driven markets such as this. The closest upside target for today is a h idden pivot at 8973.78, but if it’s breached by more than 2-3 points, especially within the first 90 minutes of the session, we could expect further progress north, to a short-term cycle maximum of 9160.34.

DEC S&Ps (935.30): We’ll use a hidden pivot at 948.75 as our minimum upside target for today – that’s assuming shares accommodate us by move higher. If the futures breach that number by more than 1.50 points intraday, or close above it, it would portend a continuation of the rally to at least 970.80.

OEX (477.19): On a rally, our minimum target would be 483.74, a hidden pivot, but if that number were to be exceeded even slightly – by more than a point, say – we’d be looking for a burst to at least 494.18 by no later than Wednesday.

DEC BONDS (109.11): The futures would need to print 110.15 (a somewhat lower benchmark than the one given here previously) within the next two days to get out of short-term jeopardy; otherwise we see a test of support near 107, where they made an important bottom in late October. If it does not hold, the December contract could fall to as low as 105.09 over the next three weeks. If this occurs, we would need to revise our long-term bullish outlook, which has seen the action between 107-115 as consolidation for a possible moon shot to 120+.

$ QQQ (28.00): Yesterday’s penetration of a 28.35 hidden pivot suggests the Cubes are headed up to at least 29.81. Once again, let's try to short up there by buying some December 29 puts. Bid 0.60 for two, contingent on the Cubes trading 29.99 or lower. This is a tad lower than Monday’s bid, but still realistic.

FEB GOLD (318.40): Just a small change. By closing last week below a hidden pivot at 318.10, the Feb contract signaled possible weakness ahead, with a worst-case downside target of 310.00 over the next 2-3 weeks. They'd need to pierce 325.70 to get out of immediate jeopardy.

DEC NASDAQ 100: (1128.0): The futures opened above the stop on our recommended short, so no position was entered (or if it was, you may have gotten short and stopped out simultaneously, presumably at the same price). The bullish action in the futures suggests they will rally at least to the next pivot, 1200.00. This number is without value for us, however, since it coincides exactly with a rou nd number where crazed speculation by both longs and shorts will be rampant.

***

AOL (16.57): Monday’s spiky opening slightly exceeded the 16.99 target we’d been using, implying that the next hidden pivot above it, 17.20, will be reached. Just to stay limber, let’s offer a round lot short at 17.19, stop 17.26. Make it good until the final hour.

$ ; + CSCO (15.06): We hold four Jan 12.50 puts (CYQMV) for 0.35. Let’s lower the offer to 0.15 on four Dec 12.50 puts (CYQXV) we’ve been trying to short against them. We’ll also bid 0.10 for four Dec 17.5 calls (CYQLW), or 0.05 for a dozen, good on the opening rotation only.

INTC (21.05): Intel still appears bound for 23, the lower threshold of a huge, bearish gap it left on the charts in early June.

$ C (38.52): Our minimum upside projection is still to 40.24. The target will make a good short if it is hit on a spiky rally, so let's offer 200 shares there, stop 40.34, good in the first two hours.

+ GG (9.85): We hold 200 shares for an average 4.35. The closest hidden-pivot support lies at 9.54, but if the stock closes below it or trades more than 0.11 cents lower intraday, I’d infer that a fall to at least 8.74 is imminent. For those of you who have stood patiently by gold patiently, here’s something I know you’ll enjoy: http://www.321gold.com/editorials/w...llie111202.html

+ DROOY (3.08): Uh-oh. We own 600 shares for an average 4.29. Any further weakness should be expected to bring DROOY down to a hidden pivot at 2.89, since support near $3 has gotten pounded during the last month and is getting pounded once again..

$ + MSFT (57.69): Still no change. We hold two Dec 60 calls for $1. There's a hidden pivot at 60.22 that is our minimum upside target for now. Let's try to backspread our position by offering 100 shares short of 60.19, g-t-c. This trade is only for those who own two December 60 calls.

$ + EBAY (70.75): eBay was the strongest performer on our list yesterday, as you will already know. We hold two December 75 calls (QXBLO) for 0.40 and we're offering a hundred shares short at 71.98 as a backspread hedge. That's 11 cents shy of our current minimum objective, 72.09, a hidden pivot.
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Alt 04.12.2002, 07:20   #3
RIVA
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Deflation's Growing Power
by Rick Ackerman

Like the gravitational pull of a black hole, deflationary forces that have been waxing for nearly a decade in the global economy are becoming irresistible. It is happening slowly, to be sure, though no longer so slowly as to remain invisible and largely unobserved. Over the last year or so we have seen prices fall in an expanding list of products, including autos, clothing, computers, furniture, gasoline and heating oil. Nor has the service sector been spared, as prices for hotel rooms, telephones and airplane tickets also have fallen, in some cases precipitously. This would seem to be good new for consumers – and it is, at least for the moment. But it is bad news for sellers of goods and services, since, for most of them, it will mean lower profits. You don’t need to be a genius to see that this will eventually impact consumers adver sely, however, since it portends growing unemployment and shrinking paychecks for American workers.

Just ask the employees at United Airlines. Most have already capitulated on wages to help their employer avoid bankruptcy. The mechanics are the last holdouts, for reasons that were spelled out last week in a Wall Street Journal article. It did not concern United’s mechanics specifically, but their trade union, whose bosses just weeks ago envisioned, not pay cuts from current levels averaging $60,000-$70,000, but raises to $100,000 and above. We’ll know soon if the mechanics were bluffing, since, by rejecting United’s ultimatum, they would risk having no job secur ity, no health coverage and possibly no work.


A Pleasant Side
Meanwhile, a pleasant, deflation-related surprise for those of us who live in Colorado has come in the form of falling lift-ticket prices. The Thanksgiving holiday was one of the biggest ever for the region’s ski resorts, which benefited from heavy autumn snowfall that lured vacationers from all over the U.S. What Denver-area news reports did not mention, however, was the heavy discounting o f lift tickets that helped draw the big crowds -- and doubtless will continue to draw them, barring drought or a precipitous slide in the economy.

Anyone who skied here a couple of years ago could have seen it coming. I met some friends for a few days on the slopes of Aspen in 2001, and one-day tickets were $65 (if memory serves). How much higher could they go, I wondered -- especially with Gen-X and Gen-Y slackers becoming an increasingly important component of ticket sales? In fact, the price of Colorado ski passes has plummeted, particularly in the last few months, and deals that bring a single-day pass down to $16-$20 for top resorts are much more widely available than they were even a ye ar ago. Will this mean lower profits for the ski operators? Perhaps. But if tickets had continued to escalate to $75 or higher, you can be sure the resorts would be dying rather than filling the slopes in the same way Wal-Mart fills its stores -- with bargain hunters.


Two Absolute Musts
We also observe that, as the case for deflation grows more and more compelling, writing on the topic is improving co mmensurately. Below are URLs for two of the best articles I’ve seen – both are brilliant, really, and should be considered must-reads by all of you who would endeavor to understand the forces that are holding the economy in check. The first is by Marshall Auerback at Prudent Bear, whose insightful work we have featured here before.

http://www.prudentbear.com/internationalperspective.asp

He explains, among other things, why deflationary drag is making a true economic recovery increasingly unlikely. The second article is Contrary Investor’s lead item for December:

http://www.contraryinvestor.com/mo.htm

The latter feature even got a rise from a pen-pal of mine, Fred H., who has remained skeptical about the threat of deflation since we began debating the subject years ago. The Contrary Investor distinguishes deflation from pricing pressure, a perspective that helps to explain why so many economists are confused about the macro picture. “There’s a lot to agree with in here, true enough,” writes Fred, with characteristic understatement. If you can read both of these articles and come away thinking the U.S. economy is on track for a recovery, then you are not playing with a full deck.

__________________________________________________________________________________


[The + symbol means we have an open position, while $ means there is actionable advice.]

DJIA (8742.93): We zigged but stocks zagged Tuesday, but I’ll continue to emphasize one direction or the other in my forecasts, since an alternative scenario for each and every issue tracked would do little more than embellish an intrinsically boring and trendless outlook. For this vehicle, round-number support lies at 8700, but if it’s easily ruptured, 8400 is the first place where support thickens. A rally would not meet signifi cant resistance till 8908, a hidden pivot that is not worth shorting.

$ DEC S&Ps (923.80): If the futures do not first breach yesterday’s 910.70 low, then we can try to short a hidden pivot at 939.85. Do so by offering a single E-mini contract short at 939.75, stop 940.25, good until the final two hours. Switch to a 2.50-point trailing stop below 933.00, using 924.00 for a target.

$ OEX (469.62): If the OEX goes no lower than yesterday’s bottom, 468.57, a rally could be expected to reach a minimum 479.37. Short there on your own terms with a very tight stop, but only until the final hour. If 479.37 is easily penetrated, infer that the bull is back.

DEC BONDS (109.06): The futures would need to print 110.05 today to get out of short-term jeopardy; otherwise we foresee a test of support near 107, where they made an important bottom in late October. If it does not hold, the December contract could fall to as low as 105.09 over the next three weeks. If this occurs, we would need to revise our long-term bullish outlook, which has seen the action between 107-115 as consolidation for a possible moon shot to 120+.

QQQ (27.17): We’ll back away as the Cubes come down to a fibo at 26.60 in search of traction.

FEB GOLD (321.70): It’d be premature to get excited just yet, but if the Feb contract can muster a two-day close above a hidden pivot at 324.70, it would imply a very likely test of September’s 330.00 high.

DEC NASDAQ 100: (1094.50): The closest support of significance in the short-term picture lies at 1070.75, a fibo. In any event, it will take a rally of at least 35 points to jump-start the bull cycle begun in early October.

***

AOL (14.21): AOL’s promising rally got derailed yesterday by the kind of announcement we’ve come to expect from the company – a prediction that advertising revenues will drop by as much as half next year. The news seemed to have unsettled Wall Street, which is still fixated on the mirage of Q3 profit growth. For AOL’s shares, crucial support lies at 14. If it is penetrated decisively, however, we should expect the stock to fall to at least 12.82, a fibo.

+ CSCO (14.52): We hold the Jan 12.50 puts (CYQMV)/ Dec 12.50 put spread four times for 0.20 after selling four of the Dec 12.50 puts yesterday for 0.15. We also bought four Dec 17.50 calls (CYQLW) on the opening for 0.10.

INTC (20.31): Intel needs a booster rally of at least 1.02 points from some bottom no lower than 19.53 to get back in gear. We’ll just watch for now.

$ C (37.85): Citi’s mild relapse changed our time frame a tad, but our minimum upside projection is still 40.24. The target will make a good short, so be ready to offer 200 shares there, stop 40.34, later in the week if the stock revives.

+ GG (10.50): We hold 200 shares for an average 4.35. There’s a hidden pivot resistance at 10.60, but if Goldcorp chews through it in the first half-hour or so, look for the rally to continue to at least 11, where the stock made a series of tops in mid-November. Anything above 11.13 would shorten the odds that September’s high near 12 is about to be challenged. If you want a fresh look at the pricing of gold from the perspective of Tony Bortolin, who is featured at 321Gold.com and Prudent Bear, click on this URL: http://www.321gold.com/editorials/b...olin112402.html .

+ DROOY (3.35): We own 600 shares for an average 4.29. Drooy is not yet free of the pull of $3, but yesterday’s strong surge should help to heighten buying interest at that level if the stock should dip down to it yet again. The most immediate challenge is a hidden pivot at 3.39, but if the stock is holding above it after the first 90 minutes or so, it’ll be an odds-on bet to reach a minimum 3.78 in this rally cycle.

+ ; MSFT (56.71): We hold two Dec 60 calls for $1, but we can pull the 60.19 stock offer for now, since it is not likely to be tagged over the next day or two. Let’s watch to see whether a fibo support at 56.05 survives before we attempt anything further.

+ EBAY (68.89): We hold two December 75 calls (QXBLO) for 0.40 but getting off a round-lot short at 71.98 looks unlikely for the next day or two. We’ll do nothing for the time being.
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Alt 05.12.2002, 10:17   #4
syracus
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Bull-Trap Signs

Rick Ackerman

The intraday indicators have turned so wishy-washy that I found myself looking elsewhere for meaningful clues. Usually I write Trading Notes, then do forecasts and recommendations for the issues tracked below. Today, however, I started with the forecasts in hopes that, once I'd looked at a dozen or so charts, their graphical vital signs would give me something to write about up top. As it happened, I didn't have to go too far down the list to find that ominous dark spot on the X-ray. It manifested itself in the stochastic indicators for the DJIA weekly chart. My approach to stochastic analysis is simple: If ascending price peaks are matched by descending stochastic peaks, that is a bearish divergence; and if it happens on the long-term charts, it is even more bearish.

This is exactly what has occurred in the Dow Industrials' weekly chart: The index got very overbought when it made a top on August 18, but it got even more overbought when it topped last week. The bearish implications would be negated or at least mitigated if the Indoos turn sharply higher today and tomorrow. But if the Dow should close below 8700 (or so), it would be a decisively negative sign for the intermediate term -- six to eight weeks, in this case. The same holds true for the S&Ps and the OEX, though not for the Nasdaq 100, which has generated a fairly bullish stochastic picture over the same period. Taken together, however, and notwithstanding the relatively positive stochastic readings for the Nasdaq average, these technical clues suggest that a heightened level of caution is warranted. The rally from early October's lows has smelled like a bull trap all along, but now, technically speaking, it's starting to look like one too.

[The + symbol means we have an open position, while $ means there is actionable advice.]

DJIA (8737.37): Stochastic indicators for the daily chart are falling gently but look like they still have at least another day or two to go before they would be capable of supporting a decent rally. If so, there are two places we could look for support: 8644.46, a fibo that lies just beneath Wednesday's low; and 8500, the approximate midsection of a consolidation zone that was formed between late October and late November. Stochastic signs on the weekly chart look somewhat ominous - not only because they are starting to roll down from overbought extremes, but because the top itself is bearishly divergent with a stochastic top that was formed in conjunction with the August 18 peak.

$ DEC S&Ps (919.00): The futures made their low yesterday within a point of a minor hidden pivot, but the subsequent bounce was not very powerful, considering the pivot marked the end of a trend that had played out over two days. This leaves us mildly bearish coming in this morning, but we'd be open minded to the bullish case for the near term if the futures are trading above 920.30 after the first hour. That would put them in good shape for a run to at least 927.50 - a target which is shortable via the E-mini until the final hour. Use a 928.25 stop-loss, switching to a 2.50-point trailing stop below 921.25. Target: 914.00.

OEX (468.03): There's a fibo support a 461.27, but if it's penetrated easily the OEX should be expected to fall at least to around 455, near the middle of a consolidation zone carved out between mid-October and mid-November.

DEC BONDS (109.25): Wednesday's high barely exceeded our 110.05 benchmark, somewhat alleviating a bearish outlook for the near-term. We won't relax until 112.24 is hit, however, but a 111.02 print would provide some breathing room. In a bigger picture, if support near 107 does not hold, the futures could fall to as low as 105.09. If this occurs, we would need to revise our long-term bullish outlook, which has seen the action between 107-115 as consolidation for a possible moon shot to 120+.

QQQ (26.57): The Cubes smashed through a fibo support at 26.60, implying the correction has yet to run its course. There are no precise targets that I can discern immediately below, although a vague band of support near 25.50 would appear to beckon.

FEB GOLD (323.10): No change. If the Feb contract can muster a two-day close above a hidden pivot at 324.70, it would imply a very likely test of September's 330.00 high.

Click for December or February Gold Chart.

$ DEC NASDAQ 100: (1071.00): The closest hidden-pivot resistance lies at 1124.00. Although it is unlikely to be achieved today, we can nonetheless prepare to short there in the final hour with a 1123.75 offer for a single E-mini contract, stop 1125.25.

***

AOL (13.84): The breach yesterday of support near 14 implies AOL will now fall to at least 12.82, a fibo. If it seems to get little support there, the next likely stop would be the round number, 12.00.

+ CSCO (14.43): We hold the Jan 12.50 (CYQMV)/ Dec 12.50 put spread four times for 0.20, as well as a four Dec 17.50 calls (CYQLW) for 0.10. Stay put for now.

INTC (19.74): Intel broke below an implied support we'd flagged at 19.53, but we'd still give the bull the benefit of the doubt of the stock is able to rally to 20.32, 1.02 points above yesterday's low. Until then, we'll remain on the sidelines.

C (37.85): Citi looks so mellow hanging out above 36 that we can only assume its charging its batteries for another bull run. Our minimum upside projection is still 40.24, but let's no longer gear for a short at that level, since the target may not restrain the stock's further progress for long.

Goldcorp
chart
+ GG (10.61): We hold 200 shares for an average 4.35. Goldcorp shredded its way past a hidden-pivot resistance at 10.60, suggesting further upside to come. Anything above 11.13 would shorten the odds that September's high near 12 is about to be challenged.

Durban Roodepoort Deep
chart
+ DROOY (3.45): We own 600 shares for an average 4.29. Drooy surmounted the resistance of a hidden pivot at 3.39, making it a good bet to reach a minimum 3.78 in this rally cycle. The most significant impediment along the way is the 3.65 top made on 11.13, but it looks primed to yield.

+ MSFT (56.54): We hold two Dec 60 calls for $1. A fibo support at 56.05 got tagged, but the stock showed no particular weakness thereafter. We'll rate it as neutral coming in, a market stock that will follow rather than lead.

+ EBAY (68.25): We hold two December 75 calls (QXBLO) for 0.40. Do nothing further for now.

syr
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Alt 06.12.2002, 07:47   #5
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Gong Tolls for Dollar

Rick Ackerman

Not since Chairman Greenspan gave his "irrational exuberance" speech in 1996 has a speech by a Fed governor stirred up so much commentary as the one given by Ben Bernanke on November 21. He said, in so many words, that the Fed would simply not let deflation happen - that it would do everything in its power to prevent a deflationary collapse. Not that such a collapse could ever occur in the first place, mind you. Indeed, Bernanke was quick to aver that the odds of deflation are very, very low. By the carefully-scripted standards of the Fed, however, this would qualify him as a relative scaremonger. Recall that the last time Mr. Greenspan spoke on the topic, he assured us that the chances of deflation were "extraordinarily remote." We were undoubtedly given to infer that the world is far more likely to be destroyed by a comet over the next year or two than to experience falling prices and wages. We've argued stridently otherwise in this space, and would note in passing that the inflationists seem to require a lot of dubious rhetorical tricks to buttress their case, such as it is. But putting aside the question of whether the Fed can fend off deflation with all-out stimulus -- which arguably has been occurring anyway for more than a year -- one thing seems both obvious and irrefutable...

...the dollar is toast.

If I'm right, Bernanke's speech will be cited years from now in the history books as a gong-clear warning that the dollar had nowhere to go but down. This will not happen overnight, especially with Japan having declared recently in favor of an even weaker yen, and euroland in no condition to burden its exporters and addled economy with a hard currency. But happen it will, since the quantity of electronic dollars in circulation is so cosmically vast as to ensure from the outset that the greenback eventually must be repudiated as a reliable store of value. Think about it. Foreigners are holding dollars up the wazoo, and along comes Bernanke, following thirteen consecutive rates cuts, to say, almost literally, You ain't seen nuthin' yet. We should take the man at his word - and stockpile gold against the day when all currencies are discovered to be as intrinsically hollow as the dollar.

***

[The + symbol means we have an open position, while $ means there is actionable advice.]

DJIA (8623.28): Stochastic indicators for the daily chart are still falling, with perhaps a day's room before they hit bottom. Now that a support we'd flagged at 8644.46 has been breached, we expect the decline to continue to around 8500, the approximate midsection of a consolidation zone that was formed between late October and late November.

DEC S&Ps (909.00): Below the round number 900 there's a flimsy support near 892.50, but if it fails on a closing basis the futures could be expected to fall another 20 points at least. A bullish note is that the daily chart looks too oversold to suggest a crash here - or at least, more than another day or two of downside.

OEX (461.67): The OEX bottomed just 0.01 points from our fibo-based target, 461.27, but if that number is penetrated today expect the decline to continue to at least 455, near the middle of a consolidation zone created from mid-October to mid-November.

MAR BONDS (109.06): Switching to the March contract, we'd need to see a close above 109.25 to breathe easier. Otherwise, a test of October's 105.30 low beckons, with risk over the intermediate term down to as low as 104.13 if it should fail. In a bigger picture, if support at 105.30 does not hold, we'd need to revise our long-term bullish outlook, which has seen the action between 106-112 as consolidation for a possible moon shot to around 120.

QQQ (26.20): A vague band of support near 25.50 will have to serve as a short-term target, since there are no compelling hidden pivots in sight.

FEB GOLD (325.60): One more day above a hidden pivot at 324.70 and we should assume the Feb contract is ready to test September's 330.00 high.

DEC NASDAQ 100: (1056.00): The futures are a day or two from a bottom, to judge from stochastic indicators on the daily chart, but that does not tell us how far they might fall. There are no useful pivots immediately below to use for targets, so two prior bottoms - the first at 1019.00, the second at 974.00 -- will have to suffice.

***

AOL (14.00): The fact that AOL could rally 16 cents yesterday is testimony to the fact that even crap does not fall ceaselessly without occasionally correcting. Perhaps savvy investors got wind of the fact that, below $14, AOL is trading underwater and the Time-Warner part of the company represents value? Regardless, our downside target is still 12.82, a fibo, or 12.00 if any lower.

+ CSCO (14.11): We hold the Jan 12.50 (CYQMV)/ Dec 12.50 put spread four times for 0.20, as well as a four Dec 17.50 calls (CYQLW) for 0.10. Again, we'll plan on doing nothing further.

INTC (18.96): Intel looks headed for a thick shelf of support near 18. A bounce is likely, but we can discern no particular edge in bottom-fishing there. C (37.14): Citi remains tightly controlled in preparation for a distributive rally to 40, but its handlers may have to let it fall to 35 or so if the broad averages continue to weaken.

+ GG (10.84): We hold 200 shares for an average 4.35. A print above 11.13 would make Goldcorp a good bet to challenge September's high near 12. Meanwhile, although the stock has been as tentative in its upward probing as non-bullion stocks have been in their decline, it looks like the bulls are quietly in charge.

+ DROOY (3.61): We own 600 shares for an average 4.29. Durban's peak was seven cents from our minimum target, 3.78, but we're not gearing for action today no matter how high it goes. With guys like Bernanke running around giving speeches, we'll downgrade to "low" the threat that round-number support at $3 is about to be tested.

+ MSFT (55.34): We hold two Dec 60 calls for $1. Searching for traction, MSFT looks like it will grope its way down to 54, near where multiple bottoms were made in November.

+ EBAY (67.85): We hold two December 75 calls (QXBLO) for 0.40. Like numerous other issues tracked above, eBay looks to be a day or two from a short-term bottom. This constrains us from buying puts, so we'll simply have to bide our time with the calls, which fortunately came cheap.

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Alt 08.12.2002, 22:11   #6
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Running With the News

by Rick Ackerman

Prescient as always, the stock market saw Treasury Secretary O’Neill’s resignation for what it was: an instant boon to investors and balm for the beleaguered taxpayer. Small wonder, then, that the Dow Industrials took the news and ran with it, surging 120 points in a matter of minutes after having started the day on a dismal note. Whoaaaa! Let’s back up and try that again. In reality, this line of thinking is such rubbish that only someone like Larry Kudlow, CNBC’s spurious answer to John Madden, could have voiced it -- did voice it, actually, during the CNBC segment that passes each day for enlightened on-camera dialogue between Kudlow and the always voluble James Cramer. Now, there is no point in pretending that either Kudlow or Cramer is lacking in intelligence, although both seem to turn stridently stupid whenever the microphones are switched on. Let’s just say they know who butters their bread and, in order to remain in the public eye, that it will always behoove them to emphasize good news over bad, and to find the silver lining no matter how dark the cloud.

Strictly speaking, O’Neill’s resignation is neither good news nor bad, since nothing of significance that has happened to the economy since he took office could be attributed to him; nor could any conceivable successor – the estimable Robert Rubin included – all by himself turn the economy around. So why, if Kudlow is as laughably wrong as always, did stocks take off on the news, which also included the resignation of Fed Governor Lawrence Lindsey? Plain and simple, the stock market is under such deft distribution these days that any news short of a nuclear blast in New York City can be, and invariably will be, spun as bullish and used to squeeze shares higher. The effect is similar to something we witness occasionally in the concert hall or at the theatre. A newly minted Juilliard grad does a too-clever take on Beethoven that sounds like it was transcribed by a hip-hop artist. But before the audience can summon a proper measure of revulsion for such tripe, a shill in the audience yells "Bravo!" and rises to his feet, clapping and cheering like someone who has just experienced a musical apotheosis. And so it goes on Wall Street. Before investors can begin to parse the news, the program traders flip their "buy" switches, steam-rollering anyone so foolish as to wonder what O’Neill’s resignation might actually portend. Cramer and Kudlow are part of the chain reaction, but the spin they put on it is by then superfluous, since the stock market has already "interpreted" it with a manifestly irresistible and seemingly bullish surge. That is how the game works, but woe to anyone so foolish as to think O’Neill’s resignation warrants holding stocks at their headline-reactive prices over the weekend. And speaking of the weekend, here’s your reading assignment, another gem from Morgan Stanley’s Stephen Roach, the deflationist’s deflationist these days: http://www.morganstanley.com/GEFdat...ri.html#anchor0

[The + symbol means we have an open position, while $ means there is actionable advice.]

$ DJIA (8623.28): The Dow bounced from near 8500 -- precisely where we’d expected it to bounce -- but it remains untradable via strategies that can be plotted a day in advance. If the index breaks below 8500 today, the next stop lower should be a no-brainer for anyone who has followed Black Box. On a rally, the first hidden-pivot that looks interesting lies at 8820.98. You can short there until the final hour with a micro-stop, provided you are comfortable with my pivots.

$ DEC S&Ps (910.50): Friday’s low occurred a point and change above our target, 892.50, support from which was based on an obvious prior low made in mid-November. There are no enticing trades for today that I can discern, although boredom might tempt me to go short if and when the futures reach 936.00, a minor hidden pivot.

$ OEX (464.14): The OEX bottomed within less than a point of our minimum downside objective, 455. There’s not much to say today, although, like the S&P futures, this vehicle could tempt me to short a boring tape: at 472.34, stop 473.00. You can use the Dec 470 puts, riding (i.e., mimicking) whatever bid is reflected by the market makers when the index first touches 472.10, but you’ll be on your own thereafter.

MAR BONDS (109.07): The futures surged above our 109.25 bullish threshold but couldn’t hold the gain. Until such time as this occurs, there will be downside jeopardy to 105.30, October’s low. In a bigger picture, if support at 105.30 does not hold, we’d need to revise our long-term bullish outlook, which has seen the action between 106-112 as consolidation for a possible moon shot to around 120.

$ QQQ (26.49): The Cubes fell to within a quarter-point of our target, 25.50, before rallying robustly into the close. If the rally continues to 27.48 today, you can short a round lot there with a 27.53 stop. Switch to a 0.20-point trailing stop below 27.07, using 26.54 for a minimum objective.

FEB GOLD (327.10): September’s 330.00 high repelled the futures on the first try, but they’ll be banging on it again today if non-bullion stocks are flaccid or weak. The target -- a high-confidence number, as far as we’re concerned -- is a minimum 337.10

DEC NASDAQ 100: (1065.00): The closest hidden pivot of interest lies at 1105.00. If and when the futures get there, you can short an E-mini at your complete discretion. A very tight initial stop (i.e., one that risks no more than $30 of your capital) is suggested.

***

AOL (14.00): Our downside target is still 12.82, a fibo, or 12.00 if any lower, but I can come up with no risk-wise way to leverage it from these levels.

$ + CSCO (14.18): We hold the Jan 12.50 (CYQMV)/ Dec 12.50 put spread four times for 0.20, as well as a four Dec 17.50 calls (CYQLW) for 0.10. In the first hour only, you can try shorting 100 shares at a hidden pivot at 14.66, stop 14.71.

INTC (18.71): Intel underperformed the averages and still appears headed for a thick shelf of support near 18. A bounce is likely, but we can discern no particular edge in bottom-fishing there.

C (37.56): Our immediate upside target is a minor pivot at 39.10, but once above it Citi would be an odds-on bet to reach a minimum 41.71. The implied rally is not so compelling, however, that we will risk premium exposure in the December 40 calls.

+ GG (11.15): We hold 200 shares for an average 4.35. Goldcorp is bound for a test of September’s high near 12, but we expect the stock to eventually blast through it, en route to an intermediate-term target of 16.06. That’s where we’ll do some profit-taking, but probably not before. Action in and around a major hidden pivot at 11.23 will tell us whether the stock is ready to make its move.

+ DROOY (3.69): We own 600 shares for an average 4.29. Our profit-taking objective is a hidden pivot at 7.35, but Durban will first have to clear a lesser pivot at 4.78. For now, stay put.

+ MSFT (55.47): We hold two Dec 60 calls for $1. Stochastic signs on the weekly chart look ominous -- which, given this stock’s bellwether status, could spell weakness for the market as a whole in the months ahead. More immediately the outlook is neutral to slightly bullish. Nothing further is advised for today.

+ EBAY (68.54): We hold two December 75 calls (QXBLO) for 0.40. If eBay can close above 69.00 today it would torque stochastic indicators for the daily chart into moderately bullish mode. Stay tuned.

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Alt 09.12.2002, 22:36   #7
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Sorry, falscher Thread : ... Test
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Alt 10.12.2002, 08:33   #8
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The Non-Recovery
by Rick Ackerman

The December issue of The Richebacher Letter makes some very interesting statistical comparisons between past economic recoveries and the one allegedly under way now. Real GDP growth has rebounded by an average 5.3 percent in times past, but measured over the 12-month period begun in Q3 of 2001, it has been a far more subdued 3.0%. And that’s with the hedonic adjustment we’ve written about here before, which took a $7 billion increase in computer sales and pumped it to $75 billion on the basis of ever-multiplying computational "horsepower" per dollar. Do you find that your productivity increased proportionately since you swapped your old 233 mHz desktop for a Pentium 4? Me neither.

The stats cited by Dr. Richebacher grow still more uninspiring, if not to say ominous. While capital spending has recovered to an annual growth rate of 2.4% in the past, investment is still plummeting this time aro und, at a negative annual rate of 19.7%. On average, trade deficits persisted even during cyclical upswings, but never as they have this time. The average growth for net exports during recovery periods has been –0.1%, but the comparable figure for the current period is minus 17.2%. And none of you will be surprised to learn where the pockets of strength are these days: in consumer spending, which despite massive Fed stimulus via the housing market is up just 3.0%, trailing past recoveries that have averaged 5.3%; and in government spending, which is running at a 4.7% growth rate, compared with 1.2% in the past. This last increase is not apt to be sustainable, however, since local economies are nose-diving, even if the ruling elite in Washington, D.C. have yet to feel our pain. An AP dispatch in today’s edition of The Boulder Camera notes that sales tax revenues have dropped precipitously in the state despite Colorado’s diligent efforts over the last 20 years to diversif y out of oil and gas. It would appear Colorado has merely traded one dependency for another, since sales tax revenues now account for three-quarters of what the cities take in each year.

With the economy barely creeping along, the outlook locally is growing grimmer with each passing week. Amazingly, huge new malls continue to spring up all too often -- the latest of them an outlet-store megaplex in nearby Arvada. It is about a 20-minute drive from the $300 million Flatiron Mall that opened just a mile or so from my home here two years ago. The Camera editorial page wondered whether the outlet-store complex would hurt sales at Flatiron, but it seems a foregone conclusion, especially since Flatiron itself tolled the death knell for Boulder’s aging Crossroads Mall. Anecdotal evidence that the economy is deep into the second dip of a recession is beginning to overwhelm the bullish spin from Washington. Or perhaps it’s just Colorado that’s dying, and the rest of the country -- other than Silicon Valley, of course -- is booming? That’s what our friend Kip Reich has been telling us for some months now, but I don’t completely trust his viewpoint, which emanates from the profit-less auto sector. Readers?

__________________________________________________________________________________


[The + symbol means we have an open position, while $ means there is actionable advice.]

DJIA (8473.41): The Dow Industrials are adrift right now, bumping and bouncing off round numbers when there are no other obvious inflection points to influence price action. That makes 8400 a good place to look for support if Monday’s decline should spill over, or 8300 if it is decisively breached. We’ll remain spectators for lack of compelling opportunities.

DEC S&Ps (889.20): A close on the low of the day implies that still lower depths are likely to be sounded this morning. Because the futures spent a good deal of time consolidating near 880 between mid-November and mid-December, that is where we should expect them to seek support today. With no precise inflection points available, however, we’ll remain uninvolved.

OEX (453.99): Like the Dow and the S&P futures, the OEX looks sufficiently oversold on its daily chart to suggest that a bottom of at least short-term importance is no more than a day or two away. Round-number support at 850, then near 850, appears to beckon, but it would yield no particular edge for purposes of bottom-fishing.

MAR BONDS (109.19): The futures have been oscillating nervously for more than six weeks, biding their time, in our estimation, between 106 and 112 in preparation for an eventual run at 120. A close above 109.25 today or tomorrow would suggest a successful test of the November peak at 112.11 lies in the offing, but we doubt the futures are ready for an assault on the multiple peaks near 114 that were made in early autumn.

QQQ (25.22): The round number 25 sounds like a promising resting spot, but our hunch is that the Cubes will fall a bit lower, to 24, to pick up support from the consolidation zone that served as a launching pad for early December’s rally to 29. we’ll do nothing for now.

FEB GOLD (326.40) : The Feb futures evidently have more digesting to do in the wake of Friday’s spurt to $330. If so, a correction to as low as 321.60, a fibo-based support, would be perfectly healthy. Stay tuned.

DEC NASDAQ 100: (1015.00): Exactly a month ago, when the futures last came down to 1000, they crashed through it enroute to an intraday low of 974. Accordingly, the most bullish scenario we could see for today would call for a marginal penetration of 1000 by just a point or two, then a squeeze on shorts fooled by what would later prove to have been a false breakdown. Otherwise, 974 itself will become a likely spot for the futures to seek support.

***

AOL (13.08): The Internet rumor mill on Monday was the source of some ominous predictions for AOL’s employees. Word has it that the company’s human resources department has reserved conference rooms in six cities today where AOL has a significant presence. According to the source, layoffs c ould run as high as 25% of the firm’s staff, with smaller severance packages than have been typical at the firm, and the biggest cuts coming in San Francisco, Mountain View and Columbus, Ohio. Whatever occurs, our minimum downside target remains 12.82, a fibo, or 12.00 if any lower.

$ + CSCO (13.50): We hold the Jan 12.50 (CYQMV)/ Dec 12.50 put spread four times for 0.20, as well as a four Dec 17.50 calls (CYQLW) for 0.10. Let’s try to cover the short side of our calendar spread with a 0.10 bid for the four Dec 12.50 puts. Make it a day order, no contingencies.

INTC (17.68): Intel trashed a support at 18, leaving only November 11’s 17.27 low to break its fall. If the support fails, the stock would have to fall to around 16.55 to get traction. That is where the stock made a moderately important peak on October 15.

C (36.15): Citi still looks to be tightly controlled, but if it can’t hold above 36 we should look for it to pull back to around 34 in search of support. The stock will be reinforced somewhat by the fact that its canny handlers had almost two weeks to distribute it above 38 in November to the usual widows and orphans.

+ GG (11.00): No change. We hold 200 shares for an average 4.35. Goldcorp is bound for a test of September’s high near 12, but we expect the stock to eventually blast through it, en route to an intermediate-term target of 16.06. That’s where we’ll do some profit-taking, but probably not before. Action in and around a major hidden pivot at 11.23 will tell us whether the stock is ready to make its move.

+ DROOY (3.77): No change. We own 600 shares for an average 4.29. Our profit-taking objective is a hidden pivot at 7.35, but Durban will first have to clear a lesser pivot at 4.78. For now, stay put.

+ MSFT (53.53): We hold two Dec 60 calls for $1. Until yesterday the lowest low recorded during the last five week’s was November 11’s 53.82. However, the breach of that number late in the day implies immediate downside potential to 51-52, where the stock did quite a bit of consolidating before launching toward 60 with a huge gap on November 4. All we can do for now is sit with the calls, since the puts are not cheap enough to warrant "strangling" the position with the purchase of December 50 puts.

+ EBAY (67.47): We hold two December 75 calls (QXBLO) for 0.40. With yesterday’s loss of a mere dollar per share, eBay was a relative pocket of strength. If the broad market continues weak, however, the stock’s handlers are apt to take it down to as low as 65 before they could be induced to load up on shares for the next rally. We’ll keep our distance for now.
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Alt 11.12.2002, 09:19   #9
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Plaudern

Beating Inflation
by Rick Ackerman

Let’s debate the inflation/deflation question – you first, by responding to the following question: If inflation is about to take off, what it is that we should rush out and buy tomorrow? Stocks, perhaps? A vacation home in Lake Tahoe? Iowa farm land? An Impressionist painting? Oil in the ground? Collectible stamps? A Bugatti? 1950s baseball cards? A Tiffany lamp? Depression glass? A Persian rug? I ask because, other than gold, there is nothing else that leaps to mind that would qualify in my book as an absolute no-brainer.

For the moment, however, I doubt that even die-hard inflationists could be seriously worried that the prices we pay for the stuff that fills our houses – TV sets, furniture, refrigerators and DVD players, to begin the list – are about to take off. I look around my own house and the only items that I expect to appreciate, if perhaps more slowly than in the past, are a rocking chair that I bought about twenty years ago from a woodworker named Robert Erickson, and a book by humorist Bruce McCall called Zany Afternoons. I paid $800 for the rocker and it supposedly is worth thousands now, but the book appears to have been an even better investment percentage-wise. It was $20 new in 1982, but copies in merely okay condition have turned up on the Web for as much as $850. My copy is pristin e, with a dust jacket that doesn’t even have a nick in it, but even so, I hardly think it will double in value again soon -- regardless of whether the Fed pulls out all the stops to “beat” deflation, as it has said it will.

Anyone who is worried about inflation has probably forgotten the 1970s, when prices of just about everything seemed to be rising more or less constantly. At the time, we were induced to buy now because we knew it would cost more later. But if you are concerned that this is about to happen again, you should be out swapping dollars like crazy for assets, besting anyone foolish enough to take the other side of the deal. We should note at this point that the cause of inflation is not an excess of dollars per se, but of dollars bidding up goods or services. That said, and assuming an inflationary spiral is imminent, as well as the dollar’s collapse, which goods should we be bidding up?

Car Not on Short List
It would appear that one item for which we should not have to bid too eagerly is the automobile. I’ve been holding out for a free Lexus myself, but that may be a tad wishful, even given the rapidly deteriorating state of the new-car market. But consider how patience paid off for one Black Box subscriber, a Boulder rabbi who was skeptical when I first broached the subject of deflation in a conversation we had more than three years ago. He writes: “Speaking of a weak auto sector and your recurrent theme of deflation, for the first time, I am inclined to agree with you. Although we don't particularly need it in a life and death sort of way, we thought it would be convenient to have another car. Yes, that brings us to five drivers--two under 21-- and four cars. Though none of my kids has ever even had a ticket, one can imagine wha t our auto insurance bill is.

”For the first time in my life, I got to shop leisurely for a car. I did so over the past three months. I'm glad I hesitated! Over the past two months, I have watched the price of the car I ultimately bought (a 2002 leftover Pontiac Aztek) drop an extra $2,000 after already having a $2,000 rebate on it. Back when they first appeared on Fisher's lot in the summer of 2001 (or, that's when I noticed them), they had stickers on them for about $25,000. Informal conversations with salesmen back then showed little price flexibility. I probably could have bought the car for about $24K . Yesterday, Jessica and I bought the same vehicle from the same dealer for $18,800. Since the dealer did not succeed in selling us any after market stuff (warranties, "clear bra", fabric protector or the like) I have no idea where they could have made more than the $300 "dealer prep."

Where’s the Profit?
”Prices are indeed going down. For people like me, who did not spend but saved during the booming 90's, and have no debt, these are great times!” He notes in a follow-up message that “some astute reader will surely point out that dealers get money from the manufacturer to push slow models, so I'm sure the dealer made a few hundred dollars. However, how GM made any money at all on the car beats me. The only way they will turn a profit is if the thing starts breaking after the warranty is up and start selling me expensive replacement parts, but they will have to wait at least three years to do so.”

So let me ask all of you die-hard inflationists once again: With inflation supposedly just around the corner, what is it that I should rush out and buy today? I’m all ears – not to mention, eager for a final chance to find some bargains before prices take off.

E-Mini Trader
If you got shut out of the last E-mini trading demo, you can sign up for today’s at the following URL: http://www.terranovaonline.com/TNO_...rFutures2.asp?L EFut2 ; or call Terra Nova Online at 800 228-4216. The show will begin 11 a.m. EST (Wednesday), with attendance limited to 50. Your MarketWise Black Box editor will be on board, as well as a veteran CME floor trader.

______________________________________________________________________________


[The + symbol means we have an open position, while $ means there is actionable advice.]

DJIA (8574.26): The nearest potential rally resistance worth noting is a hidden pivot well above, at 8788.67. We’ll make that our upside target for the time being, but it might take two days or more to get there. If the Dow instead falls, we’ll be watching those boring round numbers again: 8500, 8400, etc.

DEC S&Ps (902.00): Oversold stochastic indicators on the daily chart are starting to round up from the frozen depths, but it would take a close today of 918.50 or higher today to trigger them bullish. For now, we’ll remain uninvolved.

OEX (460.49): The OEX would require a close above 466.50 to turn stochastic signs friendly. On a strong rally, the first crucial resistance would come at 475.32, a hidden pivot. You can short there on your own terms, but risk no more than nickels and dimes on the initial stop.

MAR BONDS (110.03): Yesterday’s mildly upbeat close was sufficient to imply the futures intend to challenge the 112.11 peak made in November. In a bigger picture, they have been oscillating nervously for more than six weeks, biding their time between 106 and 112 in preparation for a projected run to 120.

QQQ (25.60): The nearest rally resistance worth mentioning is a hidden pivot at 27.52, but the Cubes need only finish the day above 26.30 to pick up a stochastic tailwind.

FEB GOLD (324.20): As noted here earlier, the futures have more digesting to do in the wake of last Friday’s surge. If so, a correction to as low as 321.60, a fibo-based support, would feel right as rain now.

DEC NASDAQ 100: (1031.00): We’ll use a hidden pivot at 1105.00 as our upside target, but I’ll repeat the pullback scenario just in case. To wit, the marginal penetration of 1000 by just a point or two could set up a short squeeze with the power to carry nearly a hundred points. Worst-case downsi de over the near term is 974.00.

***

AOL (13.75): Dire rumors failed to materialize, depriving AOL of what might otherwise have been an interesting day. Now stochastic forces appear to be gathering some thrust, although there is no hidden-pivot target that I can offer. For the time being, risk of a fall down to 12.82 is low.

+ CSCO (13.93): We hold four Jan 12.50 puts for 0.30 after covering our short Dec 12.50 puts yesterday for 12.50. We also have four Dec 17.50 calls (CYQLW) purchased for 0.10. For now, do nothing further.

INTC (18.13): We’d projected a test of November’s 17.27 low, but Intel could escape the magnetic pull of that number with a close today of 19.10 or higher. That would turn stochastic influences associated with the daily chart decisively bullish.

C (36.79): For this vehicle as well as numerous others tracked herein, it would take just a modest rally to turn stochastic indicators for the daily chart supportive. A close above 37.65 would do the trick, putting Citi on course for the trip up to around 41 that we’ve been projecting. Daunting resistance near 38 would first need to be overcome, but a short-squeeze could probably chew through it in two days.

+ GG (10.85): Stochastic indicators for the daily chart are rolling down from very overbought levels and would become heavy following a close today of 10.42 or lower. Regardless, we’ll continue to hold 200 shares acquired for an average 4.35. Our profit objective is an intermediate-term target of 16.06.

+ DROOY (3.57): Durban is picking up volatility, but any negative close today would dampen the upside for the next 2-3 days. We own 600 shares for an average 4.29, with a minimum price objective of 7.35. First, the stock would have to clear a lesser pivot at 4.78.

+ MSFT (54.01): We hold two Dec 60 calls for $ 1, but the next few trading days will have to be real doozies to resuscitate them. Stochastic indicators look moderately promising, but they probably lack sufficient power to do much more over the next day or two than prevent the stock from falling to 54.

+ EBAY (68.20): We hold two December 75 calls (QXBLO) for 0.40. The stock could get goosed to as high as 72.05 (a hidden pivot) over the next two days, but that wouldn’t be enough to take us out of our calls with a decent profit. We’ll sit on the position for now, since it’s not worth augmenting.
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Alt 12.12.2002, 10:23   #10
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Readers Respond
by Rick Ackerman

We’ve gotten some interesting responses to a question posed here yesterday: In which assets do we invest if we expect inflation to break out? We’ll take up this subject at length next week, by way of quoting from the e-mail we receive over the next several days. Suffice it to say, we remain skeptical that the huge debt burden amassed by American businesses and households over the past decade can simply be inflated away, even if the Fed has made stridently clear its determination to do so. If mere determination were sufficient to overcome deflationary drag, Japan’s economy would not still be mired in a liquidity trap. It must be noted that Japan’s task of re-inflating should have been easier than ours, at least in theory, since, as I’ve pointed out here numerous times before, the Japanese had insatiable demand from U.S. consumers to help buttress their export economy. We should ask, therefore, Who will hel p bail us out when the recession starts to deepen? The only possible answer is the American consumer. But this implies that he would have to take on an even greater debt burden in order to sustain even moderate economic growth. Is this a way back to prosperity? Not if you believe, as the Austrian economists do, that wealth is created by capital investment rather than by rising asset values or, most emphatically, higher levels of consumption. We’ll try to flesh this point out next week, using responses from Black Box subscribers to augment the give-and-take. Meanwhile, there will be a one-day hiatus for MarketWise Black Box, since your editor will be going out of town on Friday for the weekend. Friday’s edition will be published as usual, but the next issue after that will arrive on Monday evening for Tuesday.

________________________________________________________________________________________


[The + symbol means we have an open position, while $ means there is actionable advice.]

DJIA (8589.14): No change. The nearest potential rally resistance worth noting is a hidden pivot well above, at 8788.67. We’ll make that our upside target for the time being, but it might take two days or more to get there. If the Dow instead falls, we’ll be watching those boring round numbers again: 8500, 8400, etc.

DEC S&Ps (902.20): Our bullish threshold will come down a bit as a result of yesterday’s tedious dirge. Today the futures would need to close above 912.80 to trigger a friendly stochastic signal. I wouldn’t advise going long on the close, however, since indications are merely mildly encouraging, not exuberant.

OEX (460.69): Just a small change. The OEX would require a close above 461.00 to turn stochastic signs bullish for the near term. On a powerful rally, the first crucial resistance would co me at 475.32, a hidden pivot. You can short there on your own terms if and when the time comes, but risk no more than nickels and dimes on the initial stop.

MAR BONDS (110.28): The futures are on their way to test the 112.11 peak made in November. In a bigger picture, they have been oscillating nervously for more than six weeks, biding their time between 106 and 112 in preparation for a projected run to 120.

QQQ (25.72): No change. The nearest rally resistance worth mentioning is a hidden pivot at 27.52, but the Cubes need only finish the day above 26.30 to generate a bullish stochastic tailwind.

FEB GOLD (325.50): We’d warned of a possible correction down to as low as 321.60, and it will indeed remain likely until such time as the futures surpass a hidden pivot at 329.80. This is fractionally beneath the spiky peak at 330.00 made last week, but if 329.80 is exceeded by a tick, consider the conquering of 330.00 a done deal. When this hap pens the futures will be imminently on their way to a minimum 336.50, a hidden pivot.

DEC NASDAQ 100: (1035.50): No change. We’re using a hidden pivot at 1105.00 as our upside target, but I’ll repeat the pullback scenario just in case. To wit, the marginal penetration of 1000 by just a point or two could set up a short squeeze with the power to carry nearly a hundred points. If the futures get hit by selling, worst-case downside over the near term would be 974.00.

***

AOL (13.65): Turns out the rumors were true, albeit a day premature. AOL on Wednesday announced layoffs that eventually could equal last year’s 1,925. The story was reported as follows by Reuters: "America Online will cut about 300 jobs on Wednesday, beginning an expected wave of layoffs as it trims costs and tries to revive the embattled Internet division of AOL Time Warner Inc., a source close to the company said. "An AOL spokesman declined to comment. Sources famili ar with the situation as well as analysts expect the layoffs to be the first over the next couple months -- targeting overlap and areas that are no longer core to the company's new strategy. The Internet division, based in Dulles, Virginia, employs about 18,000 people. America Online Chief Executive Jon Miller said earlier this month he planned to cut costs in the ‘nine-figure’ amount, and most analysts expected reductions of more than $100 million. Miller also indicated the company may phase out areas that were not core to its new strategy of building a high-speed Internet service, new paid and commerce services and programming.

Some sources have said the layoffs could match the 1,925 made last year, shortly after AOL completed its $106.2 billion purchase of Time Warner. The AOL division has been struggling with a deep slump in advertising spending and subscriber growth, as well as ongoing federal probes into its accounting practices." The stock confounded expectations – as w e might have expected it would – by rallying, but given the news, we’ll continue to use 12.82 as our minimum downside target for the near-term.

+ CSCO (13.85): We hold four Jan 12.50 puts for 0.30 after covering our short Dec 12.50 puts yesterday for 12.50. We also have four Dec 17.50 calls (CYQLW) purchased for 0.10. Yesterday’s inside day changed nothing in our outlook, which called for passivity.

INTC (18.16): Just a small change. We’d projected a test of November’s 17.27 low, but Intel could escape the magnetic pull of that number with a close today of 18.92 or higher. That would turn stochastic influences associated with the daily chart decisively bullish.

C (36.26): I’d said a close above 37.65 would turn stochastic influences decisively bullish, but Citi on Wednesday could not muster even an intraday penetration of that pivot. Today the stock need only finish above 37.41 to do the trick. That would put it on course for a move up to aroun d 41, assuming that presumably formidable resistance near 38 can be surmounted via the obligatory short-squeeze.

+ GG (11.25): We hold 200 shares for an average 4.35. Goldcorp’s strong finish tamed stochastic influences on the daily chart that were beginning to threaten. Nothing further is suggested for now, but we’ll note nonetheless that we expect this minor rally cycle to reach a minimum 12.71. Our profit objective lies considerably higher, at 16.06.

+ DROOY (3.79): We hold 600 shares for an average 4.29, with a minimum price objective of 7.35. First, the stock will have to clear a lesser pivot at 4.78 on a closing basis.

+ MSFT (54.66): We hold two Dec 60 calls for $1, but with one week to go they have become a longshot. Bullish stochastic influences will kick in if the stock can close above 55.00 today, but they will not likely be powerful enough to push MSFT more than a couple of points next week.

+ EBAY (67.59): No change. We hold two December 75 calls (QXBLO) for 0.40. The stock could get goosed to as high as 72.05 (a hidden pivot) over the next day or two, but that wouldn’t be sufficient to take us out of our calls with a decent profit. We’ll sit on the position for now, since it’s not worth hedging.
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Alt 13.12.2002, 10:11   #11
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Arguing the Other Side

Rick Ackerman

Just a reminder: The next issue of MarketWise Black Box will be sent out Monday evening. I would caution you that the stock market has a remarkable propensity to do crazy and sometimes violent things whenever I go out of town for more than a day. To those of you who may have experienced this manifestation of Murphy's Law yourselves, I would suggest that you, too, go out of town so that we can hope to cancel out each other's karma, at least until Monday, when we'll back in front of our monitors.

Meanwhile, before airing a subscriber's interesting comments on the inflation/deflation question, we should pause for a word or two about gold's powerful rally on Thursday. Conventional news sources said it was the result of a weak dollar and mounting tensions over Iraq. True enough, albeit simplistically expedient, but we should not lose sight of a far bigger picture that sees these spurts and feints in bullion's price, no matter what the news, as the adolescent stage of a bull market that eventually will push gold quotes to levels that may lie beyond the imagination, even, of many gold bulls. I've repeated this over and over again for more than a year, but I will say it again: Right now, as an investment, gold is the no-brainer of a lifetime. If this statement was true last January, it became an in-your-face fact a few weeks ago when Fed Governor Ben Bernanke told the world that the U.S. stood ready, in effect, to debase its currency to whatever extent is necessary in order to fend off deflation.

Now, on to the discussion. Below is a letter I received from a subscriber who works as a tax accountant in the Pacific Northwest. He sees fiscal stimulus as a reliable way to rekindle inflation, no matter how dead the economy, and further notes that gold's bullish price action is conclusive evidence that inflation lies ahead, not deflation. The subscriber writes as follows:

Goldcorp Hedge

"First, I want to thank you for sending me your free nightly newsletter. It is excellent--I read it as soon as it pops up on my email every night. I am not an active trader; although I am a tax lawyer by trade, I represented all of the local securities brokers in the ______ area in the late 60s and early 70s and had some limited but good training from some excellent traders which has benefited me greatly over the years in understanding how the markets work. At some point in the future, I might try to get into your program and trade the markets, but right now I am trying to take investment positions I can periodically avoid thinking about. I am primarily in T's; have six figures in BEARX; and own 2,500 [Newmont Mining] for an average of around $17.83, and 500 Goldcorp at $9.17-- a result of reading your newsletter. I am thinking about converting some or most of the NEM to GG because, having read their filings and statements, I've concluded I like the latter's management and business plan better.

"The inflation deflation issue is a hot topic of the moment. Your 'Inflation or Deflation' essay several weeks ago was excellent -- better than any of the many articles I saw online. At that time, you concluded that the economy would not go into an inflationary spiral because the [prospective losers] had significant political swat and would do everything possible to protect themselves. I thought the concluding analysis was a little weak but that the answer was correct. I still think that.

Airplane Money

"I have read Bernanke, and the commentary following his speech stressed the intuitive proposition that the man who controls the printing press can print until he runs out of ink. That is wrong. Suppose you are Alan Greenspan, and you have decided to create inflation. Exactly what steps do you take? You call the printing press in the basement and tell them to run packages of $100 bills. Then you call the helicopter company and have them throw the bundles of cash out the window as you run down 5th Avenue? Or do you simply credit $10,000 to every checking account in America? I think neither. The helicopter-money answer is counterproductive because, when the Fed attempts it, the dollar ceases to be a medium of exchange. Facts are that additions to bank reserves, and reduced-price bank reserves, are having a declining impact on the money supply. Bankers have finally figured out that there is credit risk in some of these high-leverage, non-supporting loans, and the money is no longer getting out the door so easily. "So how would we get inflation? Through fiscal policy -- the origin of all prior inflations. It is awfully easy for Congress to authorize spending in excess of what the lending markets will support, as we all know. But at this point we don't see any evidence that the lending markets have drawn the line; in fact, long T-bond rates are flat. You are forecasting the bond futures at 120, and my judgment is that you are probably correct (maybe later than March though). So at least before March, we don't see inflation resulting from fiscal action either.

Why Gold Is Rallying

"So why is gold going up? We know that if deflationary forces prevail, gold cannot increase in value against the fiat currency. Purchasing power of the dollar will go up in a deflation, including relative to gold. There are two possible explanations: One, the current value of gold is greatly in excess of the current trading market. (The story about the CEO of Goldcorp placing an order for 40,000 ounces at market which did not fill demonstrates that the true market is not the one reported by KITCO and the CBOE). We can have commodity-price increases in a deflation that result from structural supply/demand changes (i.e., grains because of bad weather, oil and gas because of supply fluctuations and steel because of tariffs, etc.). Unfortunately the structural supply/demand market for gold is primarily a monetary series. So that is a difficult but not impossible explanation, although my own current view is that it is in fact what is happening.

"The other possible explanation is that the market is influenced by the intuitive assumption that the Fed can in fact cause inflation and is responding in the only readily available marketplace. If so, when that proves out, gold will tank. So, on to your question, What do we buy besides gold if the answer is inflation? Collectibles worked in the 1970s, but they won't work as well now because the medium-of-exchange function of money is more significant than it was then.

Store-of-value is still an important factor, although one would want to be sure the collectible ultimately would have a ready trading value; under the most likely inflation scenario, most stuff will not. Thus, expensive art might qualify, but many other collectibles won't. So the best answer is energy. It is also the reason why I am in the natural gas business. Unfortunately, it is very difficult for someone not in the industry to get into a position to drill holes in the ground on an economically effective basis. Assuming you think the legal system will survive to enforce the rights of stockholders, there are some small public companies in the natural gas business that may be the second best asset after gold. Thank you again for your nightly commentary and trading advice. DWS"

My response will follow in Tuesday's edition of newsletter. Have a great weekend!

[The + symbol means we have an open position, while $ means there is actionable advice.]

DJIA (8537.92): Zzzzzzzz. The nearest potential rally resistance worth noting is a hidden pivot well above, at 8788.67. We'll make that our upside target for the time being, but it might take two days or more to get there. If the Dow instead falls, we'll be watching those boring round numbers again: 8500, 8400, etc.

DEC S&Ps (901.90): Tedium continues to reign, requiring but a slight adjustment in our short-term numbers. Today the futures would need to close above 909.30 to trigger a friendly stochastic signal. I am not advising that you go long on the close, however, since it looks like a weak trigger.

OEX (458.51): Again, just a small change. The OEX would require a close above 460.00 to turn stochastic signs bullish for the near term. On a powerful rally, the first crucial resistance would come at 475.32, a hidden pivot. We'll provide theoretical put prices if warranted to go short up there.

MAR BONDS (110.26): No change. The futures are on their way to test the 112.11 peak made in November. In a bigger picture, they have been oscillating nervously for more than six weeks, biding their time between 106 and 112 in preparation for a projected run to 120.

QQQ (25.86): The nearest rally resistance worth mentioning is a hidden pivot at 27.52, but the Cubes need only finish the day above 26.10 (slightly lower than the number given here yesterday) to generate some bullish stochastic thrust.

$ FEB GOLD (332.10): Thursday's powerful rally put the Feb contract on course for a surge to at least 336.50, the upside target given here earlier. If that hidden pivot should be exceeded by more than 0.50, however, the chance of a move to at least 352.60 by no later than year's end would be around 65%. If you are long at this point on your own initiative, some profit taking near 336.50 is suggested.

DEC NASDAQ 100: (1041.00): Stochastic indicators for the daily chart have just turned bullish, though only tentatively so at this point. We'll continue to use a hidden pivot at 1105.00 as our minimum upside target while noting that chances for a pullback to below 1000 over the near term have diminished as a result of Thursday's modest gain.

***

AOL (13.56): With a small downward adjustment, our minimum downside target is now 12.68, although the stock is likely to remain north of $13 so long as the broad market continues sideways-to-higher.

+ CSCO (14.11): We hold four Jan 12.50 puts for 0.30 after covering our short Dec 12.50 puts yesterday for 12.50. We also have four Dec 17.50 calls (CYQLW) purchased for 0.10. Turgid action like Thursday's will spell slow death for our calls, but after Friday we'll still have some cheap puts with a month left on them.

INTC (18.19): Zzzzzzzz. We'd projected a test of November's 17.27 low, but Intel could escape the magnetic pull of that number with a close today of 18.37 or higher. (The threshold has been lowered a tad.) That would turn stochastic influences associated with the daily chart decisively bullish.

C (36.62): We'll lower the bar once again for Citi's handlers. Today the stock need only close above 37.12 to turn stochastic influences decisively bullish. That would put it on course for a move up to around 41, assuming that presumably formidable resistance near 38 can be surmounted via the obligatory short-squeeze.

$ + GG (12.20): We hold 200 shares for an average 4.35. Our minimum projection for the near term is still 12.71 -- 31 cents above Thursday's peak -- but if that hidden pivot is breached by more than 0.06, we should infer that Goldcorp is on its way to at least 14.76. I'd pegged 16.06 as the first place we would seek to take profits, but because 14.76 is such a high-probability inflection point we'll offer a round lot (i.e., a hundred shares) there, with the goal of replacing it on a pullback. Make the offer g-t-c.

+ DROOY (4.26): No change. We hold 600 shares for an average 4.29, with a minimum price objective of 7.35. To set up the powerful rally that will get it there, the stock will first have to clear a lesser pivot at 4.78 on a closing basis.

+ MSFT (54.17): We hold two Dec 60 calls for $1. Bullish stochastic influences will kick in if the stock can merely close above 54.20 today, but our calls will remain longshots regardless.

+ EBAY (68.73): We hold two December 75 calls (QXBLO) for 0.40. Stochastic indicators for the daily chart went bullish two days ago, but the stock, weighed down by a comatose stock market, appears to be squandering the advantage. eBay should show excellent relative strength on the next rally, but it will need inspiration from the broad market before it can shift gears.

syr
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Alt 15.12.2002, 19:58   #12
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Just a reminder: The next issue of MarketWise Black Box will be sent out Monday evening

Für unsereinen gibt's also wieder einen neuen Rick Dienstag, 17.12.2002...
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Alt 17.12.2002, 09:57   #13
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$1000 Gold, No Inflation?
by Rick Ackerman

In Friday’s edition I published a letter from a subscriber concerning the question of which is more likely, inflation or deflation. I’ve responded below with some extremely bullish comments on gold, and my conclusions may surprise even long-time subscribers of MarketWise Black Box. My comments were prompted by a follow-up query from the same subscriber, who wrote as follows: “The important issue which must be addressed is this: Given that we are in a period of deflation, how can gold go up? Obviously I agree with your conclusion that it is in a strong uptrend, but why? We know that in periods of deflation, legal-tender fiat money will go up in value against goods and services--it should be going up against gold, not down. The balance of my e-mail is directed to possi ble explanations of why that is happening although I am more interested in provoking you to advance your view than I am in defending my own.”

My reply:
Gold is especially strong right now for one reason -- the speech several weeks ago by rookie Fed Governor Ben Bernanke. With a bluntness that stunned the economic world, and with the obvious backing of his boss, he said in so many words that the Fed would do whatever it takes to ward off deflation. Now, it’s one thing for an official spokesman to say the government will no lo nger support a strong dollar, as various spokesmen of the central bank have done from time to time when it advanced America’s interest to have softer dollars. But it is quite another thing to declare that the central bank is ready to throw the dollar overboard if that’s what it takes to get the economy moving.

Why Dollar Hovers
Even so, and try as it may, the dollar cannot immediately fall relative to other currencies because 1) the euro is tied to the performance of German and French economies that over the short- and long-run lie beyond salvage either politically or demographically; and 2) the Japanese government has just begun monetizing stocks (!), buying depressed shares directly from the portfolios of banks. This suggests that the beggar-thy-neighbor game of competitive devaluations has become so deadly earnest and aggressive that one currency can no longer fall very much relative to the others. For the moment, however, all currencies remain subservient to a dollar that is linked to one of the last theoretically viable economies on earth. Regardless of how much longer the major currencies move in a seemingly stable relationship to each other, all currencies, including the dollar, will come to be measured more and more against gold. And that is why I continue to assert, as stridently and as often as possib le, that as the third millennium begins, gold is the no-brainer investment of our lifetime.

But how does this square with my deflation prediction, whereby the dollar presumably would be "king" and grow in purchasing power, even relative to gold? It doesn't, actually -- at least, not in a way that conventional thinking can comprehend, much less interpret. In fact, we are headed into an economic typhoon for which there is no historical precedent: a world drowning in debt, but also awash in fundamentally valueless money. Can deflation occur as global funny-money mounts into the hundreds of trillions of doll ars? My answer is yes, but not across all classes of assets. I will be examining them one by one in the coming weeks in MarketWise Black Box, since I've concluded that no one, even die-hard deflationists such as myself or Bob Prechter, has yet parsed the specific and seemingly contradictory details of a deflationary bust occurring in a global monetary environment characterized by worthless fiat.

Inflate What?
During my trip to California over the weekend I had a chance to talk with a friend who has always managed to stimulate my thinking about the economy. My thoughts jelled in the drive back to the airport, and I think you will find them both highly original and compelling. For now, though, let me say that I'm convinced gold could go to $1,000 an ounce without producing a commensurate repricing of goods and services straightaway -- or even much of a change in the relative valuations of currencies. (Bonds and certain other assets are another matter, but we’ll save that discussion for later.) After all, it is not perceptions that drive inflation, but physical dollars chasing goods and services. If gold went to $1,000, would dollars necessarily "chase" college tuitions up to $70,000 per year, or ground beef to $20/pound, or doctor visits to $300? I seriously doubt it -- for how could prices possibly soar without a corresponding increase in incomes -- or at least, in asset valuations that can be further leveraged? If you think more housing inflation is the answer, then, along with our Fed chairman and his board of governors, you flunk both economics and common sense. Meanwhile, we won't even mention the scenario of a wage-driven inflation, since even those who believe fervently in the economic-recovery tooth fairy are not dumb enough to believe their pay is about to double.

Stagflation Pipe-Dream
And what about stagflation? In our dreams, perhaps. For even with the Fed striving desperately to pump up asset prices, 1970s-style inflation remains a remote prospect. The economic system is simply too stressed by gargantuan debt for a muddled and gradual resolution. Moreover, unlike the economy of the 1970s, today’s is characterized by a deflationary global market in goods, primarily from China, and the mounting unaffordability domestically of health care, college tuition, and, as deficits swell, services provided by state and local government. We survived the 1970s inflation mainly because our homes, if not always our paychecks, kept p ace with inflation, and because the weight of our debts was being inflated away by a depreciating dollar. But it is a far different matter to survive deflation, when wages and most asset values are falling in both real and nominal terms. It is anomalously strong housing prices that we should be most concerned about, since they have been sustained entirely by Fed smoke-and-mirrors. To the extent the Fed chairman, a PhD in economics, continues to propagate the idea that rising housing prices represent an increase in wealth, an insidious and dangerous ignorance has come to cloud the average American's thinking about the economy. Catharsis will not likely come so easy as a mere 40% fall in the Dow Average.

______________________________________________________________________________________


[The + symbol means we have an open position, while $ means there is actionable advice.]



DJIA (8627.40): No change. The nearest potential rally resistance worth noting is a hidden pivot well above, at 8788.67. It remains our minimum upside target, but it is tediously slow and untradable in coming.



$ MAR S&Ps (909.00): We’ll switch to the march contract, for which stochastic signs on the daily chart have just turned moderately bullish. Our minimum upside objective is around 928.00, a target that lies within a quarter-point of a hidden pivot (927.75) and a fibo (928.20). Shorting near 928 is okay if you are bored, nimble and clever, but you’ll be on your own.



OEX (463.26): Above this level the first crucial resistance lies at 475.32, a hidden pivot. We’ll ponder the near-the-money puts if and when the OEX gets there.



MAR BONDS (109.04): Look for this pullback to end near 108.20, a hidden pivot. Thereafter, we expect the futures to test the 112.11 peak made in November. In a bigger picture, they have been oscillating nervously for more than six weeks, biding their time between 106 and 112 in preparation for a projected run to 120.



QQQ (25.85): No change. The nearest rally resistance worth mentioning is a hidden pivot at 27.52, but the Cubes need only finish the day above 26.10 to generate some bullish stochastic thrust.



< SPAN style="FONT-SIZE: 9pt; COLOR: black; FONT-FAMILY: Verdana">FEB GOLD (337.60): As stated in our last analysis, the futures are bound for a minimum 352.60 over the near-term. It’s obvious that gold’s bull market is gathering strength -- that even powerful rallies in Dow and Nasdaq stocks are no longer sufficient to suppress gold quotes. If the central bankers do not want to waste money trying, they would be wise to hold back until spot approaches $400.



MAR NASDAQ 100 : (1043.50): We’ve shifted to the March contract, necessitating just a small adjustment of our minimum upside target. It’s 1098.50 now – an inflection point that is too close to the round number to be worth shorting. If we can find a cheap way to play the trend, we’ll advise.



***

AOL (13.40): Our minimum downside target remains 12.68, although this brick will hold above $13 so long as the broad market continues side ways-to-higher.



+ CSCO (13.70): We hold four Jan 12.50 puts for 0.30 and four Dec 17.50 calls (CYQLW) for 0.10. As in November, the December option expiration is putting more weight on this convictionless and by now feeble rally than it can overcome without a short-squeeze assist. Chances of an explosion in out-of-the-money calls is almost nil, but Wall Street’s dog-and-pony show will have a better chance of continuing next week, with December puts and calls out of the way.



INTC (18.22): Stochastic influences have just turned mildly bullish, but they don’t warrant jumping on the December 20s, even for a nickel, or the January 20s for 55 cents. Remain on the sidelines.



$ C (37.48): A hidden pivot at 38.35 will tell us what kind of tricks this stock is up to. We’ll make that our minimum target for now, but it’ll take a two-day close above it to suggest the stock is on its way to the 41 target we’ve held in mind for many weeks. Short 38.35 with a tight stop if bored.



$ + GG (13.10): We hold 200 shares for an average 4.35. Our minimum projection is to 14.76 now that Goldcorp has surpassed a lesser pivot at 12.71. We’ll offer a hundred shares to close for 14.76, day order, with the goal of replacing it on a pullback.



+ DROOY (4.32): Still no change. We hold 600 shares for an average 4.29, with a minimum price objective of 7.35. To set up the powerful rally that will get it there, the stock will first have to clear a lesser pivot at 4.78 on a closing basis.



< B>+ MSFT (54.48): We hold two Dec 60 calls for $1. Nothing further to advise.



+ EBAY (69.28): We hold two December 75 calls (QXBLO) for 0.40. Given eBay’s bellwether status as one of relatively few companies making enviable profits, we should look for the stock to lead the charge with a move decisively above $70. That’s what it will take, at least, to keep the averages moving higher.
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Alt 18.12.2002, 14:12   #14
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Leveraging a Quiet Tape
by Rick Ackerman

The broad averages surrendered about half of the previous day’s gains, offering a preview of the year-end tedium that may await us over the next eight trading days. We’re pretty certain the toothsome bear rally begun in October does not have the moxie to hurdle December’s near-the-money strikes. But it’s quite possible that on Monday, with expiring puts and calls out of the way, bulls will seize the opportunity to foment a short-squeeze. It wouldn’t be the first time that pre-Christmas quietness was used to leverage the benefit of surprise. My colleague Larry Amernick informs me that the week before Christmas almost invariably has seen one day when stocks screamed manically higher. We’ll just have to pick the right day, so that we can be holding January out-of-the-money calls when it arrive s.



Hidden Pivots Explained
I should mention that MarketWise will be conducting a Web presentation tomorrow (Thursday) at 11 a.m. EST on a topic about which I have received dozens of inquiries over the last few months: hidden pivots. I’ll be giving a one-hour seminar on how pivots are calculated, and how they can be applied. You can register by pointing your browser to the foll owing URL:



http://www.marketwise.com/mw_main/NassWeb.asp



There’s room for 50 participants, but don’t worry about getting shut out this time, since, if demand warrants it, we’ll repeat the presentation at a later date.



Richebacher Freebie
Today’s second note concerns Dr. Kurt Richebacher, the Austrian-school economists whom I quote here every chance I get. Anyone who still clings to the notion that the economy is about to come roaring back has not read any of Dr. Richebacher’s recent newsletters. They refute nearly all that Fed Chief Greenspan has been telling us, arguing from bedrock principles of economics that the 1990s boom was a statistical hoax, and that the correction of boom excesses has much further to go. When the Richebacher newsletter arrives in the mail at the beginning of each month, I find myself wishing that I could share it with all of you. This time, however, I can -- courtesy of the publisher, Agora Publishing, Inc. Here’s a link to the December issue, which should settle your mind about our immediate economic prospects:



http://www.dailyreckoning.com/pdfs/rch1202P.pdf



And here’s another link for those who would like to learn more about the newsletter itself, as well as how to subscribe:



http://www.dailyreckoning.com/pdfs/rch1202P.pdf



This issue is a must-read. Bears will come away with a new understanding of the dynamics of economic growth, and a grasp of the reasons why the present state of the economy all but precludes a strong recovery over the foreseeable future. As for bulls, read it and you will find it doubly difficult to remain in denial.

__________________________________________________________________________________


[The + symbol means we have an open position, while $ means there is actionable advice.]



$ DJIA (8535.39): Some revisions are in order because of the oopsy-daisy action of the last two days. My minimum upside objective is now 8628.77, but any rally exceeding that hidden pivot by more than a point or so should be expected to carry at least to the next, 8732.37. You can short either at your complete discretion, using a tight stop, or you could even trade the breakout, since you would not have much company at those levels, obscure as they are to conventional methods.



$ MAR S&Ps (902.00): It’ll take a “booster” thrust of at least 6.25 points, beginning from no lower than 895.40, to kick Monday’s rally back into gear. You can trade that intelligence as you please, but be aware that the rally would have nearly 2 0 points of potential following the entry trigger.



OEX (458.60): Assuming the OEX goes no lower this morning, a rally that exceeds a hidden pivot at 463.71 would signal further strength. My target in that case would still be 475.32, a number given here earlier.



MAR BONDS (109.06): No change. Look for this pullback to end near 108.20, a hidden pivot. Thereafter, we expect the futures to test the 112.11 peak made in November. In a bigger picture, they have been oscillating nervously for more than six weeks, biding their time between 106 and 112 in preparation for a projected run to 120.



QQQ (25.93): We’ll lower the bar to 27.33 for purposes of determining whether the n ext rally is the real McCoy. Once the cubes have closed above that pivot, we’d infer they’re on their way to at least 29.65.



FEB GOLD (337.50): The futures held the previous day’s gains nicely, affirming our prediction they are bound for at least 352.60 over the near-term. We’ll know the move-to-target is under way when the futures rally a minimum 5.00 points from some bottom above 330.60.



MAR NASDAQ 100: (1046.00): Our minimum upside target remains 1098.50, an inflection point that is too close to the round number to be worth shorting. If we can find a cheap way to play the trend, we’ll advise.



***

AOL (13.52): Use a hidden pivot at 13.26 to tell what might be on AOL’s mind. A close below it would be decisively bearish, although I hesitate to say this dreck would much benefit from more tedium spent above it.



+ CSCO (13.66): We hold four Jan 12.50 puts for 0.30 and four Dec 17.50 calls (CYQLW) for 0.10. We’ll avert our eyes for now, lest we be lulled into coma.



INTC (17.89): Zzzzzzzzzz. Stochastic influences recently swung bullish, but not very.



$ C (37.13): Our minimum upside projection is to 38.35, a hidden pivot, but a two-day close above it would imply the stock is on its way to a longstanding target at 41. Scalpers: short 38.35 with a tight stop if you’re to bored to stay out of trouble.



$ + GG (12.48): We hold 200 shares for an average 4.35. We usually associate such stocks as Citi with talented, sleazy handlers, but Tuesday’s peek-a-boo top was a reminder that even “nice” stocks are manipulated for the benefit of the few. Yesterday’s reversal will likely delay a move to our upside target at 14.76, but we’ll re-enter the order to sell a round lot there, making it g-t-c.



+ DROOY (4.11): No change. We hold 600 shares for an average 4.29, with a minimum price objective of 7.35. To set up the powerful rally that will get it there, the stock will first have to clear a lesser pivot at 4.78 on a closing basis.



+ MSFT (54.36): We hold two Dec 60 calls for $1. MSFT looks like it will continue to hang out near 54 over the near-term, absent any meaningful crisis in Redmond. One thing’s for sure: the stock remains manifestly oblivious to Trent Lott’s troubles.



$ + EBAY (70.09): We hold two December 75 calls (QXBLO) for 0.40. They’re keepers, but it will take all this stock can muster to raise them from the dead. Let’s offer one for 0.70 g-t-c, just in case strange things happen.
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Alt 19.12.2002, 08:23   #15
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Gold's Return as Money
by Rick Ackerman

Keep those cards, letters and e-mails coming, folks -- even the contentious ones -- since we’re getting some very insightful comments on the inflation/deflation conundrum. One that I received on Wednesday came in response to my recent assertion that, even if gold is on its way to $1,000/oz or higher, it doesn’t necessarily imply that we’ll face an inflationary spiral. If my somewhat lengthy explanation failed to engage you, here is a succinct and lucid grabber that likely will -- from the same source whose letter was excerpted in Tuesday’s edition: "Gold is no longer a commodity, it is money; this is just an exchange rate adjustment happening in a deflationary environment for the legal-tender fiat currency. No inflation; none in sight. It is also insightful to consider the proposition that diverse classes of assets may be affected differently--I had not considered the possibility, but no doubt you are correct."

Just so. Gold is on its way to becoming another currency, and as such, even at $1,000 per ounce, it will be no more "inflationary" for the U.S. or the rest of the world than a D-mark valued at, say, $20, or a yen priced at $1 per. And here’s a further thought supplied by my MarketWise colleague Tom McCafferty, author of many books on commodities and trading, including, most recently, "The Market Is Always Right" (McGraw Hill). Tom says that structural dislocations in the global economy are by now so severe that only a return to a gold standard can enforce the necessary discipline to bring things back into line. That is almost unthinkable in a world where debt has come to play such a gargantuan economic role, but perhaps he’s right – that a de facto gold standard is about to be forced on a world that lacks the will to rein in excesses of money and credit.

Asset Mix Crucial
I heard also from a long-time subscriber who runs a highl y successful hedge fund. He writes:

"Wouldn't a price rise in ‘essential commodities’ priced in dollars constitute inflation per se? If our standard of living is determined by the things we buy – things like food, clothing, shelter and amusement -- and those things cost more in the future, then we have inflation when viewed from a dollar perspective, right? Utilizing $1,000 gold to pay for the essentials at some time in the future would certainly be deflationary to the gold holder. If the Fed continues to monetize the ill conceived debt bubble, the real value of the dollar will collapse. The 2005 Porsche will no doubt be priced higher in nominal terms but lower in real terms. Inflation? Deflation? It all depends upon your perspective.

Structuring ones' assets correctly will have a great deal to do with that perspective.

My response was as follows:
The crucial point to consider is that global indebtedness is far too vast to monetize wit h a 1970s-style, guns-and-butter inflation. Monetizing over a hundred trillions dollars worth of essentially uncollateralized obligations implies not mere inflation, but hyperinflation. Since hyperinflation by definition is unsustainable, and since creating inflation implies taking borrowing to even higher levels than they are now, we must infer that a successful all-out effort to inflate would have to end precipitously in the form of a massive debt liquidation -- i.e., as deflation.

No Inflation in Finished Goods
In the coming months and years, as more and more people come to understand that the world's major currencies are essentially worthless, we are all but certain to witness a scramble for hard assets, with gold leading the way (as indeed it is doing). But this would be in the context of a deepening economic depression, suggesting a comatose market for finished goods. (I see economic depression or at least a very deep recession as inevita ble because, no matter how the economy evolves, the chances of companies returning to profitability within the foreseeable future are almost nil.) Meanwhile, although you could argue that farmland at $500,000/acre would eventually have an inflationary impact on the price, say, of men's suits, my contention is, not this time. Skyrocketing prices for land, oil and such would not be inflationary per se, nor would they become so unless tomatoes were to rise to $12/pound, or gas at the pump to $20. But with the economy in a funk, how could that possibly occur? The answer is that it could not, and the result would be that the price of land and oil eventually would fall back to earth -- though not the price of gold, since by then it would have assumed an almost direct, transactional role as money.

________________________________________________________________________________________


[The + symbol means we have an open position, while $ means there is actionable advice.]

$ DJIA (8447.35): If the Dow continues to fall -- you can flip the coin this time -- it would likely grope its way toward round numbers in search of traction. In the event of a strong rally, our minimum upside objective is still 8628.77. It's short-able with a tight stop, but not a good risk in the final hour.


$ MAR S&Ps (891.80): The closest downside pivot is 882.70. Accordingly, I'll suggest bottom-fishing in the first hour only, using an 882.75 bid for a single E-mini contract, stop 881.75. Using 894.00 for a minimum objective, switch to a 2.00-point trailing stop above 887.00


$ OEX (452.78): You can try bottom-fishing 448.77, a hidden pivot, in the first hour, but the specific strategy will be at your complete discretion. A very tight initial stop-loss is advised.


MAR BONDS (109.27): We expect the futures to test the 112.11 peak made in November, although there is no telling how much more time will pass before the move gets under way. In a bigger picture, the bonds have been oscillating nervously for eight weeks, biding their time between 106 and 112 in preparation for a projected run to 120.

QQQ (25.38): The closest downside pivot below a weak shelf of support at 25.00 lies at 24.49. It is useless for our purposes, since the cubes are likely to oscillate around 25 for the next week in the absence of high drama.


$ FEB GOLD (345.80): We've been using 352.60 as our minimum rally projection for the short-term since the futures closed above 324.80, but we'll raise it to 357.10, a hidden pivot that looks more compelling. If long on your own initiative, scale-out profit-taking is advised from 352.60 on up.


MAR NASDAQ 100: (1024.00): The futures closed a point below a minor hidden pi vot, but if they do so again today, expect the decline to continue down to at least 993.00.


***

$ AOL (13.14): Use a hidden pivot at 13.26 to speculate on what AOL might do next. Yesterday's close beneath it shortens the odds that the stock will fall to a 12.68 pivot we flagged here earlier. Scalpers can bottom-fish there with a 12.64 stop, but you'll be on your own thereafter.


$ + CSCO (13.22): We hold four Jan 12.50 puts for 0.30 and four Dec 17.50 calls (CYQLW) for 0.10. We’ll scalp against the position with a bottom-fishing bid for 200 shares at 12.74, stop 12.69. That's a promising hidden pivot.


INTC (17.13): Intel appears bound for a weak pivot-support at 16.07, but because of the closeness of that support to the round number, I would not suggest bottom-fishing there.


$ C (37.15): No change. Our minimum upside projection is to 38.35, a hidden pivot, but a two-day close above it wo uld imply the stock is on its way to a longstanding target at 41. Scalpers, if bored: Try shorting 38.35 until the final hour with a tight stop.

$ + GG (13.18): We hold 200 shares for an average 4.35. Our rally target is 14.76, and we are offering a round lot there to close, g-t-c, with the goal of buying it back on a retracement.

+ DROOY (4.42): Still no change. We hold 600 shares for an average 4.29, with a minimum price objective of 7.35. To set up the powerful rally that will get it there, the stock will first have to clear a lesser pivot at 4.78 on a closing basis.

+ MSFT (53.53): We hold two Dec 60 calls for $1. There are no easy opportunities that I can discern, so let's continue to snooze through this tedious loitering near 54.


$ + EBAY (69.37): We hold two December 75 calls (QXBLO) for 0.40. One is offered g-t-c for 0.70, but the odds of booking a profit are probably no better than 4 to 1.
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