Thursday, October 23, 2008

The chart shows how I came up with the 6195 target for the Indoos that's mentioned in today's commentary. When we looked at the chart during yesterday morning's Hidden Pivot tutorial session, I thought the Dow looked like it needed another week's worth of distribution before a C-D follow-through leg could commence in earnest. This is still true in visual terms, but it is nonetheless imaginable that the second, inevitable, hellish downdraft still to come could occur without much of a pause.

There's no getting around the 712.00 target shown in the accompanying chart, although that would imply a significantly higher bottom for the Dow than the one given in today's Touts. We'll take things as they come in any case, using the 712.00 target for the time being as our minimum downside projection. That implies we should also be ready for a short-squeeze to as high as 1157.25, the Hidden Pivot midpoint of the larger pattern. Please note that these numbers are not usable for precise position-trading, since they are derived from a continuous chart that "blends" expiration-month highs and lows.

The $676 target given in today's commentary comes from the long-term charts, but we'll use the intradays to project more-precise hidden swing points for the very near-term. The 10-minute chart (see inset) divulges a sequence of Hidden Pivot targets at these three prices: 704.30, 697.70, and 691.20. Each can be bottom-fished at your discretion with a stop-loss as tight as you please, but a breach, by more than 1.10, of any one of them would imply the next is likely to be reached. Alternatively, it would take a rally exceeding 766.30 today to effect a bullish reversal likely to have "legs". _______ UPDATE: The futures came down hard overnight, bouncing $10 off a low at 704.00 that fell just three ticks (i.e., 0.30) from the first target. They subsequently breached it, trading as low as 695.20, but also reshaping the pattern to produce a new target at 693.70. That's close enough to the projected low to suggest the selling for today is over. However, the 676.60 target given in today's commentary remains viable and should be used as a place to buy aggressively with a stop-loss as tight as you please.

The dollar, fundamentally and completely valueless for reasons that I have discussed here at great length, has gone ballistic. The TV punditry and other halfwits would have us believe that it's a flight-to-safety, but this is just so much rubbish. We are witnessing the mother of all short-squeezes, pure and simple, and its cause is the inability of borrowers of dollars to cover their short positions simply by rolling their loans. This is a deflationary noose around the neck of the whole financial system, and it will simply have to run its course. As noted here earlier, we should expect little resistance up to around 92.

The collapse since April has exceeded every significant low on the long-term charts above $8, creating a very powerful impulse leg of monthly-chart degree. On the weekly chart there are just two ways to read the damage. One yields a potential bottom at 6.730 (10.43); the other, at 4.480 (9.180). The futures are currently in a so-far weak bounce from within 9 cents of the 9.180 midpoint associated with the lower target, but I'd need to see a two-week close above the higher midpoint, 10.430, before taking encouragement. A bottom could of course occur at any time, signaled most subtly on the lesser intraday charts by a preponderance of bullish impulse legs over bearish impulse legs. If Silver devotees will kindly alert me in the chat room to such minor thrusts, I'll be ready to assess their potential significance in real time. Late-night note (2:07 a.m.):A minor down-pattern suggests the futures could turn on Thursday from as high as 9.295, a midpoint pivot, but any lower would indicate further weakness to its 'D' sibling, at least: 9.000. The targets would be invalidated by a rally exceeding 9.590 overnight.