A strong downdraft could yield a buying opportunity at 26.67, the midpoint support of the pattern show in the accompanying chart. I’ll put out further details on-the-fly, so if you’re interested keep your Bulletin Launcher switched on. We’ll be looking to buy near-the-money December calls if they haven’t picked up too much juice when (and if) the Cubes reach the target.
COMMENTARY for Monday
Rick's Picks for Monday
Gold’s seeming reluctance to take on a minor Hidden Pivot resistance at 822.10 is not encouraging. So that we can be more confident in any rally that develops this week, let’s put aside pivot targets for the moment and judge solely on impulse-leg action. Specifically, we’ll stipulate that the futures must touch 855.10, surpassing the two labeled peaks on the 240-minute chart, before we infer that bulls have once again taken charge.
OPEC is hoping to push crude back up to $75 by reducing supply, but there’s little technical evidence that traders are taking the threat seriously. Notice in the accompanying chart how last Monday’s seemingly impressive thrust failed to surpass the modest “look-to-the-left” peaks recorded a few days earlier. This suggests a lack of boldness on the part of buyers. Although they finally managed the feat on Friday via a second attempt, that clears a path over the near term to no higher than 57.11. However, nothing less than 61.01 will turn the hourly chart persuasively bullish.
A rally target equivalent to the one flagged in today’s ES tout lies at 8945, but a two-day close above it would suggest more upside over the near term to at least 9401. Any weakness this morning could be expected to find support near 8599, a key midpoint pivot on the hourly chart. _______ UPDATE: The pundits would have us believe stocks are getting whacked this morning because of weak numbers out for U.S. manufacturing. However, if this “revelation” took traders by surprise, we’ll eat a Chevy crankcase. The market is down simply because the short-squeeze that had pushed it higher ran out of fuel, and because the shakedown artists who more or less control the markets are intent on accumulating shares at lower prices. Now, if the futures retrace half of their gains since November 21, it would imply more downside to at least 8134, or 300 points lower. If the retracement hits 61.8%, the low would be around 7903.
The mini-indexes were headed unconvincingly lower Sunday night, presumably to be bought more advantageously by DaBoyz than at the tail end of last week’s three-day spree. If the pullback continues, a midpoint pivot at 874.75 will make a logical minimum downside target. Alternatively, if last week’s short-squeeze resumes, look for it to hit 920.25 by mid-session. _______ UPDATE: Retracement targets analogous to those given for the Mini-Dow lie, respectively, at 818.25 (50%) and 799.50 (61.8%).
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Take any dozen good reasons for being bearish right now and they still don’t equal the bullishness of the chart shown. The undeniably compelling rally objective is 13085, a 4.8% move from current levels, and one can only surmise that the dusting the 12158 midpoint received on the last pullback (12/28) all but clinched a finishing stroke to the higher number. Moreover, it implies that bears shouldn’t get their hopes too high even if, in the next few days, the Dow plummets 324 points to retest the midpoint support. As of now, that would signal not weakness, but a screaming opportunity to get long. Hard to believe, really, but that’s what the charts say.
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Best & Brightest See Rally Ahead
by Rick Ackerman on December 1, 2008 6:19 pm GMT
Some of the most astute bears we know have turned bullish in recent weeks, none moreso than Porter Stansberry. Porter was a good six months ahead of the crowd when he read Fannie and Freddie their last rites early in 2008. Although we can’t recall the last time he waxed enthusiastic about stocks, he is doing so now: “The investments you make right now will become the best investment of your entire life,” he asserts in his latest advisory. He sees this as one of the great buying opportunities of the last 30 years.
Bob Hoye is another seer of renown who thinks a turn is at hand, although not a full-blown bull market. In recent years he’s been a bear’s bear, and he’s gotten it right for as long as we can remember. He now thinks equities are building steam for a powerful rally that could carry into 2009: “A [bear rally] amounting to fifty percent of the loss from the May high seems possible,” writes Bob in the November 27 edition of Pivotal Events. That would imply 10,300 for the Dow and 1090 for the S&Ps. (They are currently trading, respectively, for around 8800 and 896). Another favorite of ours, Peter Eliades, sees a bullish correction that could last till April or May. Peter, whose Stockmarket Cycles was recently ranked by Hulbert’s as the top performing newsletter in the country for the first nine months of 2008, says that although the odds are small that the November 21 low will endure, conditions are improving for an intermediate-term rally.
Powerful MACD
And finally, there is our old friend and former PSE options-floor colleague Tom Tankka, a trader who has lived by his wits, and lived well, since we first met him nearly 30 years ago. An e-mail we received from Tom last week took a skeptical view of our recent assertion that the so-far 1200-point rally in the Dow was just one more short squeeze, destined to fizzle out as quickly as those that have preceded it. Tom responded as follows: “A short squeeze, pure and simple? Possibly. But there’s one thing you can’t ignore on the last low: the huge MACD bullish divergence. It’s one of the most powerful MACD patterns I’ve seen — and I follow them diligently, as you know. The kicker is, it exists in hundreds and hundreds of stocks that I track, and I have never seen this before. Bottom line: This rally will probably go much further than most think. The test should arrive shortly, as this wave up gets overbought. A shallow pullback should lead to a further squeeze into year end, as I think most are underinvested — especially the hedgies, who just got done selling for all the redemptions. Also, we aren’t that far off in tracking ‘29: The market dropped 49% off the highs, then rallied back like 40-50% in four months before a very painful 2-1/2 years down. We just dropped about the same, and could be set for a similar bounceback. Stay tuned.”
Investor’s ’A-List’
For our part, with the global economy sinking into its deepest bog since the 1930s, we would be astounded if stocks were indeed about to embark on the kind of sustained rally that our friend Porter envisions. However, we think his “A-list” of stocks is a good place to start if you’re seeking relative value, safety, and long-term returns. The list includes ExxonMobil, Wal-Mart, Microsoft, Johnson & Johnson, AT&T, Chevron, IBM, Pfizer, Cisco, Apple, Verizon, Intel and McDonald’s. These companies are not going out of business any time soon, and, if truth be told, the way they conduct business looks better suited to survival than the methods and policies now being pursued by the U.S. Government.
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