Monday, October 19, 2009

We are short a round lot, effectively from 101.68 after closing out half of the original position at 99.74.  Tie it to a stop-losss at 100.51, but plan on shorting a November 98 put against the DIA if it falls to 98.95.  That's a few ticks above a Hidden Pivot target, and therefore a good place to try and "work" the position.

Goldman's sleazy, predatory handlers may be running out of ways to fool us into thinking it may be over for the stock. The air pocket from 193.60 has been gut-wrenching for bulls, to be sure, but the stock would need to fall, without a corrective interruption, below 173.16 to create a convincingly bearish impulse leg on the daily chart. We shouldnt' rule out that possibility, but until it happens we are obliged to give the benefit of the doubt to a rally that has been nearly relentless for nearly a year.

A few days ago, I published a link to a powerful essay by Charles Krauthammer:  "The New Liberalism and the End of American Ascendancy".  To give the link a little more hang time, I am publishing it once again in today's edition. Click here  to access the essay.

The futures sagged after DaBoyz unloaded into Friday's briefly buoyant opening, but even after being ripped off in that way, buyers returned to drive a rally that was impulsive on the lesser charts. It went nowhere, but still, buyers were able to land a couple of body blows that turned the short-term picture from ever-so-slightly bearish to inconclusive. If they are to regain the upper hand, Sunday night action should see the futures dip no lower than 1079.25.  If that midpoint support gets trashed, however, expect the weakness to continue down to at least 1070.25. You can bottom-fish there, stop 1069.50, till 10 a.m. EDT, provided the 1088.25 point 'C' of the pattern has not been exceeded. _______ UPDATE (2:46 a.m.):  Zoom the 5-minute chart to the size of a barn door, and tonight's rally from 1076.25 starts to look impressive, but it is otherwise pretty timid stuff for a Sunday night. Youll need to drop all the way down to the two-minute chart to create some external peaks for "camouflage" along the wall of Friday's decline. The closest such resistance lies at 1084.75, and that will be where DaBoyz must decide whether the ingredients are present for a short-squeeze attempt. ________FURTHER UPDATE (11:23 a.m.): On the 2-minute chart mentioned, "camouflage" entry yielded an easy winner once the futures surpassed 1084.75.  They kept going to form a 'B' high at 1086.25, then a pullback 'C' at 1085.  With 'A' at 1081.25, entry would have come at 1086.25, and you never looked back.

The variety of possible topics for Monday’s commentary was so overwhelming that it’s hard to know where to begin. Let’s take them one at a time: Pakistan:  Until recently, we’d always thought of the al-Qaeda and Taliban insurgents as a rag-tag bunch of skirmishers, more like commandos in their operational style than armies.  Think again. We now read that they are holding 30,000 Pakistani troops at bay in South Waziristan.  If there really is a War on Terror, this is the biggest and most important battle so far.  And if Pakistan loses, the world will become a far more dangerous place. Emboldened and refreshed, Radical Islamists would find it much easier to recruit new fighters and suicide bombers. The terrorists would also be further along the way toward seizing control of a Pakistani nuclear weapons capability that has been under development for 35 years. The potential consequences of this are almost too horrifying to think about, and we can only pray that Pakistan’s army derails or at least delays a Terrorist Bomb by delivering a knockout punch. The Health Care Juggernaut:  Baring his canines, Obama has accused the insurers of being a bunch of dirty, rotten liars. The insurance companies claimed merely that Obamacare would significantly raise the cost of healthcare for most American households. Does anyone actually doubt this? If so, it’s scary to think that they vote.  This note from our friend Rich Cash nicely sums it up:  "A health care system plan written by a committee whose head says he doesn’t understand any of it, to be passed by a Congress that hasn’t and won’t read it, but exempts themselves from it, signed by a president who smokes and also hasn’t read it, with funding administered by a Treasury Secretary who didn’t pay his taxes, overseen by an obese Surgeon

It would be premature to infer that the expected rally to 1134 got underway at Friday's lows, but we can take encouragement nonetheless from the fact that the thrust so far easily speared two "external" peaks on the hourly chart. The upbeat mood could change with the start of a new week, but as things stand, the futures looked to be revving for a push over the near term to at least 1065.00. That's a Hidden Pivot, and its sibling midpoint lies at 1057.90 -- equal to Friday's recovery high. Because the high is therefore doubly resistant, we should infer from its breach, if it comes, that buyers are feeling feisty.

Appler has a little ways to go before it hits first-line support at 186.44. That's a Hidden Pivot, and you could bottom-fish there with a stop-loss as tight as 12 cents.  You'll be on your own thereafter, but if the support gives way, brace for more downside over the near term to as low as 185.16.  The ease with which either of these numbers is exceeded will tell us how serious the sellers are.