Tuesday, November 17, 2009

Index futures were breaking down in mild fashion Monday night, menacing the blithe demeanor of a rally that has buggered shorts since Halloween. We should monitor the pullback closely for signs of growing momentum, since it is occurring off a top in the E-Mini S&P that came within less than a point of a well-advertised Hidden Pivot target.

Yesterday's nuttiness left a mildly bearish hangover, since it took out a midpoint support at 75.02 before calling it a day. The 'D' target sibling of this number is 74.64, a Hidden Pivot that can serve for now as a minimum downside objective.  But bulls will have a chance to turn things around from 74.750, the midpoint support of a lesser pattern. More bullish still -- quite bullish, in fact -- would be an intraday pop today above 75.435.

A Hidden Pivot at 27.15 looks like it could be the end of the line for the bull run begun from 12.29 in January.  We hold 100 shares with an adjusted cost basis of 11.01. If and when the stock reaches 27.03, I'll recommend shorting a December 23 call against it (in covered-write fashion) and buying a January 23 put as a kicker.

The intraday high yesterday fell 11 cents shy of the compelling target at 18.560 shown in the chart. This would have bearish implications only if the current retracement exceeds 16.855 to the downside without the target having been achieved. Alternatively, if buyers take the futures higher today, exceeding 18.560 intraday -- or better yet, closing above it -- that would be quite bullish for the near term.

Yesterday's 1112.25 high missed my target by less than a point -- close enough to consider the 1113.00 target achieved.  If and when the future push decisively above it, we should use 1132.25 as a minimum upside objective.  More immediately, though, a retracement target at 1103.50 can be used, especially by night owls, to bottom-fish with a stop-loss as tight as three ticks. This target looks like a good one, so if it's exceeded we might expect sellers to prevail on Tuesday. ______ UPDATE (1 a.m. EST):  The futures have traded down to 1101.00, stopping out longs from 1103.50 with minimal damage. This portends more weakness tonight, at least, and perhaps a bit more of it on Tuesday.

The futures were working on a bullish flag Monday night, tracing out a correction that had gone as low as 1135.90 as of midnight EST. If the low holds, a pop to 1151.30 should come next, provided the 1143.60 sibling midpoint of this Hidden Pivot yields to buyers.  The 1174.90 target of a much larger pattern is still my minimum objective, but a dip today touching 1123.20 would be reason to turn cautious.

It was less than a week ago that the Wall Street Journal reported that the central banks of the world, even Russia’s, were acting in concert to prop up the U.S. dollar.  With gold’s powerful thrust to new all-time highs yesterday, however, it looks like the bankers will have to come up with a new plan.  Our longstanding target for the Dollar Index is 72.93, implying the dollar has a further 2.5 percent to fall before it is likely to find traction for a rally attempt.  (Please note that a bounce from 74.05 could also provide bulls with temporary relief.) More important than the dollar prediction, however, is an 1174.90 target for Comex December Gold that has been in play since spring. This “Hidden Pivot” price objective was triggered in May, and it and a lesser target at 1134.50 have kept Rick’s Picks subscribers properly bullish even as gold swooned, careened and flailed its way higher during the summer months and early fall.            We hadn’t expected December Gold to push past 1134.50 so easily yesterday, but the fact that it turned this “hidden” resistance into suet in less than twelve hours is testimony to the tireless enthusiasm of buyers. Their easy penetration of our target makes a follow-through stroke to at least 1174.90 as close to a sure thing as any market-driven event we could imagine.  After 1174.90, What?  So what do we expect after 1174.90 is hit? As is our wont, we’ve pushed expectations aside, ahead of the actual event. We’d prefer to let gold tell us what it will do next, based on how it interacts with the target. Because it has been so long in coming, however, and because the price pattern that produced it is so clear, we’re pretty sure that the