S&P Rally Nears a Key Benchmark

We’ll know soon whether stocks are about to continue blithely higher, since the S&Ps are stealing up on an important Hidden Pivot target disseminated to Rick’s Picks subscribers a while back. Specifically, we projected a potentially important top in the September E-Mini S&P contract at exactly 1053.00. Yesterday, the futures got as close as 1044.00 before retreating slightly in after-hours trading.

Bear-rallies

The S&Ps and other broad indexes have now closed higher for five consecutive days, testing the resolve of bears while rewarding traders who have stayed with the bullish trend.  Buyers have romped since early March, when the futures touched a bear-market low of 662. Since then, the S&Ps have gained slightly less than 58% while the Dow Average of 30 blue-chip stocks has gained 49%.  The latter rally is almost precisely equal to the Dow’s 48% rebound from the 1929 low. This is shown in the chart above.

Regarding our 1053.00 target, it is not chiseled in stone, but we’d be surprised if it shows little or no stopping power. The number is called a “Hidden Pivot,” and it is derived from proprietary methods that measure rallies and declines one cycle at a time.  In this case, the cycle is about as clear and compelling as they come, and that’s why we have extrapolated the target to two decimal places.

 ‘Chopped Liver’ Rule

 So how would we view the rally if it were to simply blow past 1053.00 without hesitating? In such instances, we apply the “chopped liver rule” which holds that Hidden Pivots are not, so to speak, chopped liver as long as they have been calculated correctly. Thus, if a pivot seems not to work, it is not because the pivot itself is ineffectual (don’t take our word for it; click here and you can ask a subscriber yourself), but because the trend itself has enough power, presumably, to reach the next pivot. This usually means that a bullish cycle of a larger degree is in play. If that is the case here, and 1053.00 is decisively exceeded, we would be looking for more upside to as high as 1153.00.  That is the next Hidden Pivot of importance above 1053.00, and it looks even more likely than the lower number to show real stopping power.

From where we’re  sitting, a rally to 1153.00 would offer the fattest pitch bears have seen in a long while – an opportunity to get short up the wazoo, but with a very tight stop-loss.

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  • Stephen September 14, 2009, 12:19 am

    This is not specific to this article, but follows the general trend of what you’re saying:
    http://news.yahoo.com/s/ap/20090913/ap_on_re_us/us_meltdown_same_old_wall_street_2

  • Junior September 13, 2009, 2:20 am

    Very doubtful the stock market will mimic the 30’s bear. They almost never do.

  • Rich September 11, 2009, 8:06 pm

    One sceptical comment typical of turning points.
    Elephants have a hard time hiding their deep footprints.
    Insiders selling in record numbers.
    Hidden Pivots proved themselves in clubs, diamonds, hearts and spades.
    We like EDZ above 7.55, SRS above 10.53, SMN above 11.17, TZA above 12.62, ERY above 14.61, BGZ above 22.14, UUP above 22.73 and QID above 23.84 here until stopped out…

    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3251493

    Regards*Rich

  • cp September 11, 2009, 2:28 pm

    Rick,

    Does the hidden pivot method take into consideration that this market is dominated by HFT and program trading? And that it dominated by a relatively small number of big and influential players? This market is not representative of broader played markets in the past, and therefore might not behave similarly.

    Or does HPM take that into consideration?

    On the markets as a whole, with such domination by few, I get the feeling that some of the big players would love to get out after such a big rise but see that not enough of the dumb money has reentered to relieve them of their investments. With interest returns so low, I bet they’re thinking “how do we get these chumps back in?”. In the meantime, they continue to bid up equity prices hoping to entice the masses back at some point. Besides, they know this run is exhausted and
    would prefer to short it all the way back down to a test of the low.

    Anyone in this market is vulnerable and I wouldn’t play in this mosh pit.

    cp

    &&&&&&

    Hidden Pivots don’t care what the program traders are doing, Palmer. The quants may not know it, but their tactics are circumscribed by midpoint pivots and ‘D’ targets. You should take the 7-day trial subscription if you are skeptical. Down on the one-minute bar chart, Hidden Pivots can never be fooled or confused. RA