Thursday, January 15, 2009

The rally begun just before Christmas amounted to 40 percent -- more than a hiccup, for sure, but not very significant relative to the big, bearish picture. Now, Crude has returned to the multiyear lows near $35 whence the frenzy began. We can infer that it is groping its way down to 32.43, a Hidden Pivot target that lies 12 percent below these levels. The larger downtrend has been almost too tortured to trade, though, since a short-and-hold strategy would have routinely subjected risk-takers to intraday swings of 6%-8%. If a major turn is in the offing, it will be signaled by a strong impulse leg on the hourly chart. Just to give you an idea of how strong, it would take a print today at 40.81 to turn the short-term trend bullish. _______ UPDATE: Crude's little crash-let today brought it down most of the way to the target, to a so-far low at 33.20. The original price objective of 32.43 remains valid -- and OEPC, you can kiss our big fat a**!

The Indoos bottomed yesterday in a perhaps too-obvious place, inches above the 8118 low recorded on December 5. DaBoyz could make their stand here, building on yesterday's seemingly well controlled accumulation, but my hunch is that they'll let the DJIA slip a bit lower before risking their ill-gotten capital. If so, we should look for a tradable bounce from around 7985, a midpoint Hidden Pivot support the provenance of which is shown in the accompanying chart. If that support should give way, signaled by a two-day close beneath it, the Dow would be warning of further jeopardy over the near term to as low as 6883. _______ UPDATE: Down 200 points in the early going, the Indoos got traction at 7995, just 10 points from our midpoint target. With an hour to go in the session, they'd bounced 250 points from the low.

The 766.60 target flagged here yesterday, a Hidden Pivot, looks magnetic, so we'll use it as our downside objective for the near term (i.e., 6-8 days). The pattern that produced it is clear and compelling, suggesting that any buying at the pivot would enjoy an enticing risk:reward. More immediately, I expect the futures to ease lower, to a minor Hidden Pivot at 799.70. Bottom-fishing can be attempted there with a stop-loss as tight as 798.90. However, if settlement is below that price it would raise the odds of a quick drop to 766.60. _______ UPDATE: With the futures down about $9, the low of the day occurred at 801.50, or $1.80 above our target. The bounce so far, to $819.90, has been pretty spirited, but it'll take a print at 823.90 today to make it stick.

We used the Lehman UltraShort 20+ Year Treasury ETF to predict yesterday's powerful thrust. The March Bond futures look like they're not done yet, since there's a midpoint resistance not far above, at 138^03 where a short-term top would be more logical. Hwoever, if they get past it, the pivot's 'D' sibling at 139^19 would become our minimum objective. _______ UPDATE: The futures rallied overnight to touch 137^31, inches from our target; then they fell very hard, to an intraday low at 136^08.5