Thursday, October 29, 2009

A Hidden Pivot at 375.95 looks like a good place to expect a turn, or 371.35 if any lower. The pattern that produced that target looks compelling on the 25-tick bar chart, where A=437.05 and B=400.97. Because the target is still discernible on the hourly chart, however, it has the potential to be an important low. These are high-confidence numbers, so even a small (i.e., 0.11-point) overshoot of the higher number would indicate more downside at least to the next.

The corrective pattern shown in the chart promises to yield a tradable low at exactly 27.63. Bid 27.66 for 200 shares, stop 27.56. If you'd prefer to use call options, parking a limit order with your broker, bid 0.87 for four Dec 28 calls (MSQLC), stopping your self out if the stock touches 27.56.  The 0.87 bid is on the stingy side, and your odds of buying the calls will therefore be better if you simply bid between the reflected bid and offer when the stock reaches the target.  (FYI, a similar opportunity exists in AAPL, which looks to be correcting down to a tradable low at 190.92. I'll make that one catch-as-catch-can.)

A serviceable target at 1027.75 has surfaced as a worst-case low in the E-Mini S&P. It doesn't sound bad enough to me to be a realistic worst-case number, but I'm just going strictly by the book. The implied sell-off in the Dow would be about 100 points.

The bonds will have an opportunity to turn powerfully bullish with a relatively modest push if they can inch up to the launching pad near 121.  The chart shows three peaks in fairly close proximity, and if an uninterrupted thrust were to exceed all of them, that would put the futures on track for a shot at 124^00.

A dubious pattern with a sausage B projects to 170.37.  This Hidden Pivot doesn't look solid enough to use for bottom-fishing, but for our analytical purposes it can serve  as a minimum downside target. As such, a decisive breach (i.e., by 15 cents or more) would imply still more weakness ahead.  If the stock merely reaches the target, that will represent a correction of about 12 percent.

While we speculate about whether the mood of the market has changed significantly, you can see that not much has happened on the 180-minute chart.  The futures were noodling near the 1037.75 pivot that I flagged here yesterday as a minimum downside target, but if they go any lower there are no Hidden Pivot supports that can be used with the same degree of confidence. If you're monitoring the futures for a bullish turn, I'd suggest looking for bullish impulse legs on the 15-minute chart. ______ UPDATE (12:08 a.m. EDT):  A closer look at the hourly chart during Wednesday night's Hidden Pivot webinar revealed two serviceable targets:  1048.50, an HP midpoint that has already been exceeded by a mile; and 1027.75, its 'D' sibling. (A=1098.50, B=1057, etc.)  _______ FURTHER UPDATE (12:55 P.M. EDT):  The 1037.75 target held almost precisely, since the futures never went lower than 1037.25 overnight. I wouldn't trust this rally any farther than I could heave a Bosendorfer, but for the record, the so far high today of 1059.75 is still two ticks shy of surpassing a first external peak. The lesser charts suggest a stall, at least, at exactly 1063.50.

A 1019.50  target disseminated via an update yesterday is still my minimum downside objective for the near term. Bottom-fishing there is encouraged, but I'll leave it up to you to furnish a suitable stop-loss. Incidentally, the target, a Hidden Pivot, coincides precisely with a 0.618  retracement of the rally from October 2's low.  If the support fails, however, the next tradable spot on the way down would be 1012.70, also a Hidden Pivot. _______UPDATE (12:46 p.m. EDT): You go, gold! I was skeptical earlier this morning, when gold's rally, promising though it seemed, had yet to exceed even a single prior peak on the hourly chart. After getting second wind, however,  the futures have surpassed no fewer than three external peaks, plus two more look-to-the-lefters along the wall of Monday's nasty decline. This is quite bullish, of course, especially in view of the fact that the rally is unfolding without the December contract having achieved a downside target at 1019.50 that had looked all but ordained to me.  Meanwhile, the 1074 target that was missed by $2 on the last rally stood to be an important one, and it still is. But Gold is at least  suggesting today that it has the energy to re-test the high. If it blows past it, the 1134 pivot that sits above it would become our new minimum objective.  

The Dollar Index is stealing up on the 76.68 pivot I'd flagged as a bullish trigger, and the  action at that price will tell us what may lie in store.  If the rally is going to make a serious run at 80, however, it should be able to take on the two peaks shown in the chart without trouble. An uninterrupted thrust past both would affirm that this rally is more than just a flash-in-the-pan.  If the rally continues, exceeding yet another peak at 76.99 before day's end, that should send shorts diving for cover. _______ UPDATE (12:50 p.m. EDT):  The 76.68 HP benchmark prevented our getting overly excited about the dollar's rally. DXY made it only to 76.58, keeping us cautious ahead of today's nsaty selloff.

When we half-jokingly talk about DaBoyz and how they are continually manipulating the markets, we sometimes lose sight of the fact that they really are out there, rigging the game so that they cannot lose.  However, even as these Masters of the Universe maintain quasi-criminal control over the short- and intermediate-term swings, they understand as we do that there are larger, uncontrollable forces lurking in the form of black swans such as the collapse of Lehman Brothers.  A post in the Rick’s Picks forum from Mario Cavolo brilliantly describes the interplay between the manipulators and those larger, dangerous forces. Here’s Mario with some thoughts on the subject that hit us like a bolt of lightning:   “Rick, I have been in a state of particularly deep pondering of these issues for the past few days, stimulated by the way, by my carrying around and reading Nassim Taleb’s classic, Fooled By Randomness, when I had a sudden insight. In the same way that I have learned here from you and others as well, we realize that 'DaBoyz,' the 'PPT' and various other interested groups (the Goldman Sachs trading desk, with 40x higher volume) with such ability, even possibly illegal ability, interfered and manipulated the market with enormous cash infusions after the March low, forcing it up beyond reason and fundamentals, such heavy handed manipulations demonstrated by all kinds of evidence in daily trading activity, volume spikes, etc.  ‘They’ Have Decided “Well guess what? THEY are at it again, my friends, and why shouldn’t it be the case? In the short and intermediate term time frames, they absolutely can and do manipulate index levels, gold and the dollar if they want -- right or wrong?  Those same BOYZ have made their latest set of new strategy decisions, of what WILL go up or down