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COMMENTARY for Wednesday
TODAY'S ACTION for Wednesday
Rick's Picks for Wednesday
The top of yesterday’s engineered rally failed to alter the bearish pattern projecting to 1051.00, the target given here yesterday; nor did it change the 1077.00 minimum downside target. That said, it must be noted that bears were still on the ropes at yesterday’s close, since virtually all of the day’s price action took place above an overnight low made on thin volume. We can use the look-to-the-left peak at 1104.25 to signal us when bulls — or rather, short-covering bears — have taken charge. Otherwise, the downside targets can stand as given. Bottom-fishing at 1077.00 with a tight stop-loss is still recommended, but the trade will enjoy the best odds if that Hidden Pivot support is hit relative early in the session.
A $1.00 drop from these levels over the next two days would do serious technical damage, since it would create a powerfully bearish impulse leg on the daily chart. Such a move would in fact exceed four prior lows, two of them “external,” leaving an unambiguously negative picture for the intermediate term (i.e., 4-6 weeks). Most immediately, the rally from yesterday’s v-shaped bottom had the potential to get the futures out of immediate jeopardy. It had stalled a penny from a 16.920 midpoint resistance, but assuming this obstacle is breached before 16.730 is exceeded to the downside, a follow-through thrust to at least 17.105 would become an odds-on bet.
The mildly chaotic series of ups and downs of the last three days has produced, not dueling impulse legs on the hourly chart, but a preponderance of bearish legs that tips the bias negative for the near term. Traders can still use a pullback today from just above 1104.80 to get long via “camouflage,” since that would be the first speculative sign that Gold is turning around. Alternatively, a move lower would encounter potentially tradable support in the range 1074.50-1075.90.
For the grave sin of reporting spectacular earnings and talking about new markets it plans to enter and conquer, Google’s shares have been savaged in recent weeks. That’s the price a company must sometimes pay when its shares are heavily in demand by institutional buyers keen on value. Even so, the so-far $94 shakeout from early January’s peak has yet to take out a single prior low on the weekly chart, let alone the two we require to signal a bearish impulse leg. That would imply a further fall of $60, a possibility we would not disparage, given the fact that GOOG’s sponsorship is so heavily skewed toward managed portfolios.
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Take any dozen good reasons for being bearish right now and they still don’t equal the bullishness of the chart shown. The undeniably compelling rally objective is 13085, a 4.8% move from current levels, and one can only surmise that the dusting the 12158 midpoint received on the last pullback (12/28) all but clinched a finishing stroke to the higher number. Moreover, it implies that bears shouldn’t get their hopes too high even if, in the next few days, the Dow plummets 324 points to retest the midpoint support. As of now, that would signal not weakness, but a screaming opportunity to get long. Hard to believe, really, but that’s what the charts say.
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How Stocks Rally Without Help from Bulls
by Rick Ackerman on January 27, 2010 2:06 am GMT · 2 comments
Yesterday’s failed rally demonstrated once again that short-covering remains the only force capable of pushing stocks higher on a given day. It also showed that there are no longer enough nervous bears around to drive the market into a sustainable uptrend. In this latest show of false strength, the Dow Industrials achieved maximum loft about midway into Tuesday’s session, when they were up about 100 points. But the set-up for this bull-less rally came the night before. As is nearly always the case, off-hours activity in the electronic index futures was used to catalyze buying urgency ahead of the opening. » Read the full article