Wednesday, October 28, 2009

Although bellwether Goldman wouldn't allow itself to be dragged lower yesterday, its rallies weren't very convincing either.  The action left me somewhat bearish on the market as a whole, but I would leap into the bullish camp if GS can muster a print today at 182.93.

Someone in the chat room asked yesterday whether the blithely bullish target at $231 is still valid, and the answer is yes.  Even if our bellwether, Goldman, is no longer a lead-pipe cinch to knock each new rally target out of the park, Apple at least looks capable of making more headway into the clouds.  The selloff this week did no damage at all to the hourly chart, and one must zoom down to the 5-minute to find a bearishly impulsive trend segment.  It projects to 194.76, a Hidden Pivot, but I'm more enthused about bottom-fishing at 190.82, the safer target of a somewhat larger pattern (A=206.75, 1/26). ______ UPDATE: Close but no cigar. Apple fell to 191.38, missing our bid by 50 cents.

Yesterday's tiresome mess pointed lower -- to 1043.50, a Hidden Pivot that you can bottom-fish with a three-tick stop-loss up until 10 a.m. EDT. I somewhat like this set-up because the whoopee-cushion bounce early in the session came from within a single tick of the midpoint pivot noted in the chart. _______ UPDATE (12:30 a.m. EDT):  During Tuesday evening's Hidden Pivot Seminar, I noticed a lovely opportunity developing on the hourly chart:  bottom-fish 1053.50, stop 1052.75.  That's a Hidden Pivot, and it will remain viable as long as the point 'C' of the pattern, 1069.25, is not exceeded first.  If the support is exceeded, its sibling 'D' target at 1037.75 would become my minimum downside objective. I have replaced the original chart that was displayed with this tout to show you a pattern that has a half-dozen things to love:  1) single-bar A, B and C; 2) strong sibling resemblance between B-C and k-A segments; 3) poor symmetry; 4) non-sausage 'B'; 5) obscure ABC-ness; 6) point 'B' located in the middle of outer space.  All slowly unfolding in the dead of night.  I sy, Go for it!   _______ FURTHER UPDATE(10:48 a.m. EDT):  Nice. The overnight low was 1052.50, so my three-tick stop-loss needed two more ticks to have caught the 7.50-point rally that followed.  Was the stop-loss too tight in theory?  I don't think so.  The pattern was so perfect that I would do it again, same way.  Now, because the low has been taken out overnight, we can be nearly certain the selling will come down to 1037.75.  I'll let you determine the stop-loss on this one, but it wouldn't hurt to be short while you wait. ______ FINAL UPDATE (1038.00): A huge, huge surprise:  ES dropped steadily for the last three hours of the day, hitting 1038.00 fifteen minutes after the day session ended. 

You have to stretch yesterday's  rally across a one-minute bar chart to see how painful the trek was. It was like walking from the Battery to Harlem in ballet slippers.  By day's end, nothing had changed a mildly bearish, 1020.70 target that I disseminated in the chat room. The so far low at 1032.90 missed that Hidden Pivot's sibling midpoint by just four ticks, so the target itself looks like a good one.  The bearish case would start to unravel, though, if buyers can push this contract above 1045.90 overnight or Wednesday morning. That would imply an impulsive rally above two nice look-to-the-left peaks etched on the way down Monday at, respectively, 1 p.m. and 2 p.m. They are both visible on the 5-minute chart. _______ UPDATE (12:07 p.m. EDT): An analysis done during this morning's tutorial session found good reason to expect December Gold to fall to at least 1019.50 before it can turn. The best shorting opportunity of the day so far is already past, but bottom-fishing at the pivot with a very tight stop-loss is recommended.

The 76.68 rally target flagged in today's commentary looks like a no-brainer on the 30-minute chart. The question is not whether DXY will get  there, but whether it will tear through it in an hour. My hunch is that it won't, but because the fate of the world's financial system hangs on the value of the dollar, we'll keep a close watch no matter what.

We’ve grown so used to forecasting with blandly mechanical detachment that it can be jolting when our instincts struggle to take over, as they did when Goldman Sachs shares dove without warning on October 15. Considering the firm’s stock chart by-the-numbers, we expected higher prices. Had the charts failed to warn us of an important top? To be sure, our strong preference for technical analysis over fundamentals comes from having gotten ambushed too many times when we followed fact and logic into a dark alley. Still, when Goldman gapped $5 lower on the opening that day, we sensed that something had changed. Since then, our unease has only grown. The bank stocks have continued to fall, although not yet severely enough to be called a crash; and gold has reversed direction as well, albeit more gently than the banks. From an all-time high of $1070 on October 15, the Comex December contract has eased to $1033, yesterday’s low, representing a total decline of a little more than three percent. But the real attention-grabber has been the U.S. dollar, which has rallied less than two percent  off recent lows. That’s not much of a rally, we know, but when it is the dollar that is doing the rallying, it is a true man-bites-dog story. Just this week, the greenback launched from a saucer-shaped bottom that had been forming on the intraday charts for the last two weeks. This caused the NYBOT Dollar Index to hit a high yesterday of 76.32, but if it goes just a bit further, exceeding a Hidden Pivot target of ours at 76.68,  that would strongly imply the rally’s got legs.  A Dubious IOU As we might have expected, the dollar’s upward progress has seized the attention of the multitudes who have been waiting for “something” to happen.