Tuesday, January 19, 2010

It looks like there is still more damage to be done, and I therefore suggest using a Hidden Pivot support at 567.71 as a minimum downside objective, or 563.64 if any lower.  If the latter number is reached, the correction from early January's  high at 629.51 will have been a tad more than 10 percent.

The three-tick stop-loss I advised on longs from 18.415 would have ejected you from the trade on the exact low of the day.  If you compensated for my chimp-like foolishness with a little brains and a slightly wider stop-loss, congratulations, since the ride from the low has been 43 cents so far.  I'd suggest using a minimum upside objective of 19.03 to manage the risk of whatever position you may still hold.

Someone in the chat room mentioned the "possibility" (per Bloomberg) of the euro dropping to 1.380, so I thought I'd have a look myself, lest the useless notion of the merely possible gain traction among subscribers. Anything is possible, of course, but from a Hidden Pivot perspective the euro looks like a 3-to-2 bet to noodle around for the next week or two.  If the euro does fall anew relative to the dollar, however,  a tradable low at or near 1.4020 would not be unthinkable, provided its midpoint sibling at 1.4299 gets breached hard.  But the larger downtrend from early December's high appears to have chickened out  just shy of a supportive low  at 1.4200 recorded in September 2009.  This suggests that although the bear market has further to go, it will need more time in distribution before the next big leg down.

Friday's New Moon plunge turned a boring 180-minute chart a smidgen less so;  moreover, the MLK-Day rally Monday night was threatening to make the picture interesting, even. The pattern shown in the chart, sloppy  'A'   and all, yields a Hidden Pivot midpoint support at 1128.50, and that's where I'd suggest that you try bottom-fishing, stop 1127.90, if the opportunity should arise. This plan will remain viable as long as the point 'C' of the pattern, 1137.75, is not breached by some puny spoiler-of-a-rally. ______ UPDATE (10:17 a.m. EST):   The overnight correction to 1126.25 took out any midpoint support we might have identified, stopping us out in the process for a trading loss of three ticks (i.e., $37.50).  Although this hinted of more weakness to come, the futures have instead whipped around and rallied 15 points, presumably for some news-driven reason. Could prospects of a Brown victory in Massachusetts be driving stocks this early in the day?

What the bullish pattern shown in the chart lacks in subtlety it makes up for in robustness.  The pattern is in-your-face obvious, with key resistance at 1074.90 -- a midpoint Hidden Pivot that was missed by 12 points at the top of the last rally cycle. This is not a sign of serious weakness, but neither does it portend an imminent show of strength.  A few weeks of tired consolidation would be congruent with the technical signs, and that is what I am forecasting for now. This bland outlook would be affirmed by weakness  today or tomorrow that breaches the 1126.50 low recorded on Friday.  That number lies within three ticks of a midpoint support at 1126.80, and a close below it would grease the skids down to 1106.90, its 'D' sibling. Alternatively, and very bullish, would be a rally today or tomorrow that hits 1154.00.  That would create a bullish impulse leg on the hourly chart that would be especially encouraging, since it would relegate the corrective abcd to the failure bin.

Traders should brace for a celebration on Wall Street Wednesday if Massachusetts Republican Scott Brown wins Teddy Kennedy’s seat in the U.S. Senate. A Brown victory in Tuesday’s special election would destroy the Democrats’ filibuster-proof majority in the Senate, and with it President Obama’s damn-the-torpedoes effort to steer the country hard-left.  Derailing the Democrats’ machine would come as good news to Wall Street, since there is probably no area of investment opportunity that is not being eyed as a source of new tax revenues by Congressional liberals. Investors aside, the entire nation could breathe a sigh of relief if Brown is able to make good on his promise to stop the trillion-dollar healthcare boondoggle from becoming law. He has campaigned heavily on this issue, although the election will offer a broader referendum on the policies of Mr. Obama and a Democrat Congress run amok. As of Monday evening, nearly all pollsters gave Brown the edge, which averaged around six percentage points. But Democrats were working feverishly at the eleventh hour to turn things around, manning the phone banks and ringing doorbells, and the election was deemed too close to predict.  Just a month ago, few would have imagined Brown had even a remote chance of capturing a seat that has been a Kennedy fiefdom for nearly 60 years. Massachusetts is among the very bluest states, and Brown’s ability to stir things up is clear evidence that the voters, including leftists who see him as insufficiently “progressive,”  are in outright revolt against Mr. Obama. It remained to be seen whether a near-miss by Brown would cause enough Congressional Democrats to switch their votes on health care to scuttle the bill. Up till now, Democratic Party leaders have appeared to accept the likelihood that fallout from passage of the hugely unpopular bill

Click here for the Online Hidden Pivot Calculator. There is also an Excel-based version of the Hidden Pivot Calculator.  These are no crystal balls, just devices to mechanically calculate targets, entry points and midpoints from price patterns that you have identified.