Monday, August 3, 2009

Friday's carnage breached June's key low, returning a _____ downside target to the spotlight. That is now my minimum downside objective, subject to bear-rally feints and forays to _____, the Hidden Pivot midpoint associated with the target.  More immediately, a lesser pattern projects to _____, the first place were we might expect a tradable bounce. Alternatively, it would take a pop this week exceeding _____ to turn the hourly chart bullish again.

Friday's pop looked encouraging on the hourly chart, but let;s hold the applause until such time as bulls duplicate this feat on the daily chart. That would take a further thrust past the ____ peak recorded June 10 on the way down.  For maximum effect, the rally would need to occur without a pause of more than a day once the first peak at _____ has been surpassed.

Assuming Americans still have the capacity for outrage, they should be rioting in the streets following last week's reports that nine big banks paid out $33 billion in bonuses in 2008. The Wall Street Journal put this travesty in perspective, noting that the bonuses were a third larger than California's budget deficit. "Six of the nine banks paid out more in bonuses than they received in profit," the Journal reported, and "one in every 270 employees at the banks - [a total of 5,000 employees] --received more than $1 million."  Compare these princely sums to the relatively paltry numbers associated with the government's "cash for clunkers" program, which provides a U.S. voucher of up to $4,500 for motorists trading old gas guzzlers for new vehicles. Cash-for-clunkers ate through $1 billion of funding last week in its first four days, prompting Capitol Hill to approve yet another $2 billion, presumably before things turned ugly on the dealers' lots.  Talk about bread and circuses! If the cash-for-clunkers giveaway enjoyed the kind of backing the banks received via TARP, thousands of Americans who don't have two nickels to rub together would be driving Bentleys, Ferraris and Lamborghinis. No Shame Lest you think the banks are embarrassed by it all, it has been reported that Goldman Sachs, for one, is on course to pay $20 billion in bonuses in 2009 -- an average of $700,000 for each and every employee. Over at Morgan Stanley, bonuses are up 30%, to an average $340,000; and at J.P. Morgan, the incentive pool for the first quarter alone has swelled by 175% to $3.3 billion.  These numbers came to light in a report issued by New York Attorney General Andrew Cuomo. Shortly thereafter, New York Rep. Edolphus Towers, chairman of the U.S. House investigative panel, pronounced the news "shocking and

The futures looked bound for a minimum 13.960 when the clock ran out on them Friday. A move to that Hidden Pivot resistance would be encouraging, but they'll need to surpass a peak at 14.470 on the daily chart to clinch the bullish case for the intermediate term.

A rally today surpassing 13.30, or a two-day close above 13.22, would lend weight to the tentative bullishness of last week's rally.  Thereafter, we could look for a follow-through to at least 14.12, or perhaps 14.36 if any higher. It would take a print at 14.85, however, to create a bullish impulse leg on the daily chart.

The Diamonds blew past a 91.96 Hidden Pivot target, stopping us out of some September 90 puts that we held very briefly for a small loss. The rally was just a run-of-the-mill short squeeze begun on garden-variety opening-bell gap, but notice in the accompanying chart how it managed to slightly exceed a very subtle look-to-the-left peak made back in January. This spells more trouble, as far as I'm concerned, for any bear who was counting on reality to reassert itself in the stock market.

Last week's innocuous-seeming rally could wind up turning the tide even more energetically against bears, so I'd suggest taking a look at the chart I've included with today's analysis of the Diamonds. It shows the subtle breach of a so-called "look-to-the-left" peak made last autumn that could have significant implications for a bear rally that many of us thought was nearing exhaustion months ago. If the E-Mini S&P gets in gear by thrusting above 1002, that would confirm a picture as bullish as it is inscrutable.

GOOG's last push fell $5 shy of a $457 Hidden Pivot target it should have reached. The target lies at exactly 457.92, and the failure would have more serious implications if the stock falls below 423.50 before it's hit.