Friday, December 12, 2008

The usual Friday burlesque has gotten off to an early start, with the mini-indexes in freefall Thursday night. There was a time when Wall Street might have celebrated the reluctance of Congress to throw so much more good many after bad. This time, however, it is bitter disappointment that we are meant to infer. But would it be so terrible if GM did not live to produce a subsidized $60,000 compact that runs 40 miles before needing a six-hour recharge? In any event, the S&Ps as of 11:30 p.m. EST had discounted a 400-point drop in the Dow on the opening. Seems a little overdone by DaBoyz, but presumably with the intention of exhausting sellers to set up a short squeeze. Night owls can try bottom-fishing at 821.75 with a stop-loss as tight as 820.75. The target comes off the 5-minute chart reproduced alongside. Please note, however, that there's an alternative target at 819.50 that would become my minimum downside objective if the stop is hit. Buying at the lower number would be the more conservative play, but that could cause you to miss a more promising bounce from the higher number. If both get obliterated, the next stop would be 806.75, a Hidden Pivot that could be bought with a stop-loss as tight as 1.00 point. _______ UPDATE: The futures went no lower than 829.00 overnight, when the apparent exhaustion of sellers cleared the way for a short-squeeze on Friday. Through it all, the grautitous ups and downs left intact a 969.25 rally target first identified here more than a week ago.

The futures still need to close above 808.70 for two consecutive days to earn our confidence. More immediately, they look bound on Thursday night for a Hidden Pivot support at 809.40, or at 807.00 if any lower. Nervous Nellies, please note: It would take an unmitigated collapse to 741.10 to negate the big-picture target at 876.20 given here earlier.

The futures were barely holding the 10.185 target of the pattern shown, but I spotted this pattern too late to suggest bottom-fishing there. The Hidden Pivot looked pretty shaky as of midnight EST, suggesting that Friday will bring more consolidation.

Our downside target at 83.95 was roundly thrashed yesterday, so here's a new one: 82.16. That is my minimum downside objective for the near term, subject to a possible delay at 83.02, its sibling midpoint. Alternatively, it would take a pop to 84.22 to turn the lesser charts bullish. Note: If neither of the downside targets shows much pluck, take it as a sign that the dollar is likely to remain week as next week begins.

The rally begun last Friday blew past no fewer than five peaks on the hourly chart without a pause, so I have my doubts that the shakeout in progress Thursday night would mutate into disaster. More likely, as noted in the ES tout, it's just a set-up for a short-squeeze. It might take yet another reversal on the auto bailout to bring that about, but stranger things have happened on Capitol Hill. Remember, these guys aren't keen on spending their weekends hard at work.