Is the economy recovering? Nowhere is there more confusion on this topic than in the pages of the Wall Street Journal. Anyone scanning just the headlines might think we’re on the cusp of a solid rebound: retail sales are up, home sales are starting to move, and the Fed chairman thinks the worst is behind us. It is only when one burrows into the newspaper, particularly the op-ed pages, that a more sobering picture emerges. The facts well behind » Read the full article
In after-hours trading, the futures appeared to be struggling to reach the 1062.75 midpoint of a minor corrective pattern projecting as low as 1056.50. Either of these Hidden Pivots can be bottom-fished with a stop-loss as tight as 1.00 point, but if the trend reverses Thursday night or Friday morning, hitting 1070.00 before 1063.75, bears had better get out of the way. My immediate target thereupon would be 1073.00, but with a good shot at 1085.00 if it’s exceeded by more than 1.00 point. [Note: The interpolated over/under numbers for the December contract are, respectively, 1065.25 and 1059.00.] ______ UPDATE (10:14 a.m.): The futures have rallied from an overnight low the fell in-between the two levels of corrections targets given above. The move was impulsive, so that the pullback now in progress must be viewed as such rather than as the start of a significant downtrend. It would take a 1047.50 print to reverse bulls on the hourly chart.
The futures look pretty neutral right now. Notice in the chart how yesterday’s downtrend played out to within a single tick of a crystal-clear target on the 3-minute chart. Now, if the recovery rally hits or exceeds its target, bulls would be back in charge. _______ UPDATE (10:22 a.m.): Gold’s rally stalled a single tick above the 1019.40 target shown in the chart, and although I had said this would put bulls back in charge, I jumped the gun. In fact, Gold needed to have exceeded the Hidden Pivot — exceeded it by more than a single tick, anyway — to suggest there’s enough buying enthusiasm to take the futures to a new threshold.
Apple’s “story” has dimmed slightly with the recent announcement of dramatic price cuts for the firm’s high-capacity iPods. The news would probably be easily absorbed if the stock were trading at half its current price, but the rally in fact has looked like it needed a rest for the last 50 points. Accordingly, we’ll use a Hidden Pivot target not far above, at 193.87, to try and get short. We’ll have a better idea of whether the stock will actually reach that number once we’ve seen how far it pulls back from yesterday’s high. Anything exceeding 182.82 would indicate possible trouble. _______ UPDATE: 188.90 is as high as buyers could muster on the last rally peak. The target is still valid in theory, but we’ll put this trade aside for now, since it can only distract.
A major top? It’s certainly conceivable, since the futures peaked last week within 1.25 points of a compelling rally target I’d spotlighted at 1984.50. Although this Hidden Pivot resistance looked very short-able, I have my doubts that it will stand for long as the all-time high. The target’s main value lay in its clarity, and in that respect it did not disappoint us. As you can see (inset), bulls exceeded it by a mere inch before diving — so far — 22 points. Subscribers who used the target to get short should have covered at least half of any positions by Sunday night and deployed a generous trailing stop for what remains. If you prefer using a stop-loss based on impulse legs, put it at 1979.25, just above a small peak on the hourly chart that was recorded Friday on the way down.
As GDXJ was working its way south from around $43, my bearish forecast called for a washout low at exactly 40.42, a Hidden Pivot support of great clarity. I’d suggested buying down there ‘aggressively’ and with an ‘absurdly’ tight stop-loss. This advice would have paid off handsomely for anyone who followed it, since the stock trampolined 64 cents yesterday off an actual low of 40.43, a penny from my target. Since a subscriber reported doing the trade as advised, I’m establishing a tracking position for the further guidance of all who may have gotten long. (He reported having bought 1000 shares off a 40.44 bid, but I’ll assume a more conservative 400 shares.) Accordingly, I’ll recommend exiting half the position on Friday’s opening if you haven’t done so already. We’ll impute any profits thereof to the cost basis of the 200 shares that will remain. _______ UPDATE (July 27, 9:48 p.m. ET): Exiting 200 shares on Friday’s 41.20 opening leaves us with a tracking position of 200 shares whose imputed cost basis is 39.66. Exit another 100 shares on today’s opening and tie the rest to an impulse leg-based stop-loss on the 15-minute chart. At the moment, that would imply bailing out on an uncorrected dive touching 41.73.
A subscriber reported success yesterday legging into the 1340/50/60 August 16 call butterfly that I’d advised. He did so 32 times at no cost, as suggested, but it took a $10 move in the stock between legs to get filled so advantageously. His maximum profit would be $32,000 with the stock trading at 1350 come August 16. Since he owns the position without cost, no loss is possible even if PCLN should all to zero or rally to $1000. We’ll do nothing further for now, but I’d suggest that those of you who were unable to buy the spread keep trying. We’ll shoot for a partial profit if the stock rallies $40-$50 in the next few weeks but otherwise do nothing further. I’ve reproduced a chart that shows why our expectation of a $120 rally from current levels, to a 1358.18 Hidden Pivot target, is not exactly farfetched. To that end, a pop above the 1270.59 midpoint pivot would be most encouraging.
I haven’t tracked currencies that closely, but because they tend to move very precisely to Hidden Pivot targets, traders should consider exploiting them whenever possible. Notice how EUR/USD has broken beneath a midpoint Hidden Pivot at 1.34841 after noodling around near that pivot for a few hours on Thursday. This suggests that it is bound for D=1.34197, at least. You can bottom-fish there with a stop-loss as tight as 3-4 ticks. Notice as well that there are two slightly higher possibilities for point ‘A’. The correction targets they yield lie, respectively, at 1.34114 and, worst case, 1.33992. I expect these numbers to work very precisely, so use them in whatever way suits you best. Note as well that a last-gasp rally to p=1.34738 after EUR/USD has fallen a bit would be short-able. _______ UPDATE (July 24, 5:35 p.m. EDT): Yesterday’s short-squeeze feint topped precisely at a midpoint Hidden Pivot (see inset, a new chart) that was originally support but which is now resistance. This price action confirms the pattern we’ve chosen as well as its ‘D’ target at 1.34197. At least one subscriber has confirmed getting short in the chat room. _______ UPDATE (July 27, 10:43 p.m.): Friday’s low occurred at 1.34206 — 0.00009 above our 1.34197 target. Shorts should have covered there, but if you were able to bottom-fish the low and catch a piece of the 144-tick rally that ensued, please let me know in the chat room and so that I can establish a tracking position for your further guidance.
A heads-up: TBT is approaching a bearish Hidden Pivot target at 43.39 that would offer a back-up-the-truck buying opportunity if it is reached. This would of course imply that the price of the underlying long bond is approaching an important top.