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January 7, 2010

Quick View on Week One

Tonight's post will be another quickie... a few comments on a couple charts I'm watching. The first is the S&P 500 weekly view. We have a jobs report coming out in the morning, and it's going to have to have negative connotations if bears are going to have any hope of containment here. Honestly, I don't understand why people fret over such reports with all the manipulations that go into them. For $%*&#! sake, the BLS has added over 100,000 jobs per month to the 2009 numbers based on their extrapolation of small business activity. Does anyone believe small businesses have been adding 100,000+ jobs to the economy each month, especially with bankruptcies pushing 5-year highs? I think the acronym "BLS" is more aptly expanded to Bogus Labor Statistics.

Anyway, let me show you what I mean by containment:

s&p 500 bear market channel

If the bear channel is conquered, the next obvious target would be the pivot from which the waterfall decline began... up around SPX 1250. I currently have no stake in the SPX, and I certainly have no desire to gamble around the bogus labor report. However, a conquest of the bear channel on the first attempt would signify the vastness of the monetization efforts being put forth by the Berskanke & Co., and would certainly help confirm long-term bullish views on precious metals.

Speaking of precious metals, let's get on to the other chart. One of the positions I'm holding to express my near-term expectations for gold and silver is a pile of calls on Silver Wheaton. I would actually like this pile to be larger. I only took a partial stake earlier this week because I was forced to chase a swing rather than jump in on a panic sell as I was hoping, and I hate chasing. Anyway, SLW has quickly become overbought on short-term RSI:

silver wheaton overbought chart

As we all know, an overbought RSI can remain overbought during a bull run and is most useful for kicking weak hands out of positions or worse... turning traders short. However, I am not looking to sell, but to buy, and I don't want to be adding to a position... especially an options position, where time works against me... when RSI is stretched. Furthermore, since the stock market is way overdue for a cycle low (thanks to Gary for his cycle work), I think I'll just sit patiently and add the rest of my options when RSI takes a dip below 50. The worst-case scenario here is that SLW runs away without giving me a setup to accumulate. It's a worst-case I can certainly live with.


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