Monday, November 24, 2008

The 726.25 downside target is still valid, but if Friday's short-squeeze gets second wind, pushing the futures above 838.50, bears had best put it out of mind. Consider Squeeze II under way if a booster-stage rally of at least 16 points erupts from somewhere not far below 789.40. _______ UPDATE: Squeeze II triggered in the orthodox manner anticipated above, producing an overnight waft that pointed toward 849.25, a Hidden Pivot. This number was posted in the chat room this morning with the futures trading in the low 830s. It can serve as a minimum upside objective for the near term.

The rally did not surpass even a single "external" peak, although any congenital weakness we might be tempted to infer from this would be negated by a print today at 8187.25. More bullish still, and hinting of a change in the short-term trend, would be a rally that surpasses 8310. From a Hidden Pivot standpoint, 8259 is about as far as any rally should be expected to go. _______ UPDATE: This morning's juicing got the Indoos to 8406, reflecting a gain of about 350 points. As of 1:46 p.m. the Dow had pulled back to as low as 8229, sufficient to be presumed ready for another leg up. Assuming the pullback low endures, the second big leg would trigger at 8464; if the low is breached, the trigger would occur 44 points above the new low.

The Cubes looked bound for at least 26.84 when the clock ran out last week, but they'd could go as high as high as 27.47 today or tomorrow if the hysteria persists. If that number is touched, it would just barely turn the hourly chart bullish, creating a weak impulse leg. However, it would take a print at 28.79 to distinguish a promising rally from mere noise.

My outlook for the dollar has been quite bullish for months, but it wouldn't take much of a decline from here to warrant caution. Specifically, if DXY breaks beneath both of the "external" lows shown in the chart -- the lower of which lies at 8717 -- without pausing to correct, it would create a bearish impulse leg of minor degree. It would take a much sharper plunge, to below 8505, to turn the hourly chart bearish, but it behooves us to use the more sensitive indicator, since, when the dollar finally turns, the swiftness of its collapse could be breathtaking.

The futures exceeded the highest target I could have projected on Friday based on the hourly chart. That's bullish going forward, but since we've exhausted the supply of Hidden Pivot targets, at least for the moment, we'll need to use a Fibonacci-based target at 839.00 as a minimum upside projection. That would represent a 0.618 retracement of the declne from the 936.30 high recorded on October 10. However, before we infer that 839.00 is in play, we'll stipulate that the futures first move decisively above 808.75, the exact midpoint of the October selloff. Friday's high at 807.10 fell just short of it.

Crucial resistance in the form of a midpoint pivot lies at 9.915, but if the futures can break decisively above it, that would hint of more upside to as high as 11.055 over the near term. Let's require a two-day close above 9.992 before we get excited about the prospect.