Thursday, May 28, 2009

A timely heads-up: July Crude lies within a blip of a Hidden Pivot rally target at 64.27 that is just 45 cents above yesterday's recovery high. The target has been more than three months in coming, so it could mark an important top. Traders can short this one with a stop-loss as tight as 21 cents. That's the minimum needed in this vehicle when initiating positions at Hidden Pivot swing points. _______ UPDATE (2:45 p.m.): The futures blew past the target and should now be presumed bound for at least _____, a Hidden Pivot associated with a lesser "extension pattern" that is running its course.

Goldman swam strongly against the current yesterday, only to reverse sharply in the second half of the session and give up its gains, plus a little. The selloff did nothing to harm the larger uptrend, since it created bearish impulse legs only on the lesser intraday charts.  The most recent of them pointed to a Hidden Pivot at 138.75 provided its midpoint sibling at 140.32 fails. As of 12:30 a.m. the stock had gone just a penny below that threshold, but if a breakdown ensues and GS falls to the lower number, I'll recommend buying 100 shares with a 138.77 bid, stop 138.66. The trade will remain viable as long as 141.90 isn't exceeded first. _______ UPDATE (11:50 a.m.): The little s.o.b. bottomed in an apparent non-place: 139.29; then it  was off an running once again, much as we might have expected. The first tradable impulse leg, though less than impressive, pointed to 144.99, subject to midpoint resistance and possible trend failure at 143.80.

The futures have balked en route to a 984.50 rally target that should have been a piece of cake. They also failed to take out a 971.00 peak from May 20 that looked vulnerable. Taken together, these are signs of incipient timidity if not necessarily of weakness, but our suspicions would be allayed if the target is reached within the next day or two. Alternatively, the downtrend in progress at the close looked bound for 940.50 subject to last-ditch support at 945.10, its associative midpoint.

Shortly before midnight, the futures were struggling mightily to achieve a minor Hidden Pivot target not far below at 884.00 If they succeed at this dubious task it would effectively transform the last three days' price action into noise, adding to a larger picture of gratuitous ups and downs  that extends back to early May. To suggest that something more might be occurring or about to occur, we'd need to see a print today below 862.50, since that would create an unsubtle impulse leg on the hourly chart. Failing that, the June contract will remain a challenge to day traders alone, full of sound and fury, but signifying nothing. In the unlikely event this vehicle turns higher into week's end with a vengeance, our maximum permissible high would be 942.25

Has the dollar put in an important low? It looks like it, since the NYBOT Dollar Index widened the gap on Wednesday between it and a key Hidden Pivot support at 80.04 that we drum-rolled here earlier. We had been using that number as a downside target since late April, when DXY was trading just above 84; it was first touched last Friday, then exceeded by a scant 0.23 points before bouncing back. Now, if the dollar is indeed embarking on a major rally in line with our forecast, stocks are likely to fall, and gold and other precious metals to come under pressure, for the foreseeable future.  These new trends may have begun to emerge yesterday, since the Dow Industrials fell 173 points and Comex June Gold reversed a promising rally early in the session to settle more than $10 below the day's highs. The short squeeze that has powered the stock market's bear rally since March 6 corresponds precisely to a period of weakness in the dollar, and that is why we expect shares to fall hard if the dollar strengthens. Why should this be so? The simplest answer is that a rising dollar is going to catch borrowers around the world with their pants down. For despite the deleveraging of the financial system that has occurred since the U.S. mortgage market began to implode about two years ago, borrowers are still caught in a vise, and the world is still massively short dollars because that is the currency in which nearly all borrowing has been done. World Massively Short Dollars Scores of millions of homeowners who are mortgaged to the hilt have implicitly bet against the dollar. So have financiers who have used derivatives to borrow dollars in some leveraged fashion. There are hundreds of trillions of