Wednesday, February 24, 2010

The 100-point decline I'd expected turned out to be more like a 30-point decline, and it was over in the middle of the night. Stocks are currently in a short-squeeze rally, every buyer  fearing that the next idiot is going to somehow read bullish implications into the speech being given by our mendacious, factually challenged, economically illiterate Fed chairman.  An 1105.50 target in the E-Mini S&P is as high as the very lesser charts take me right now.  That is 1.00 point above the so-far intraday high.

Goldman squandered an opportunity to turn vicious yesterday, lunging above two "internal" peaks on the hourly chart in the opening minutes of the session, then failing to go for the gusto by taking out the "external" peak that I've labeled on the chart. What this suggests is that the next rally cycle is doomed to fail.  From a trading perspective the stock remains a long-term short, although the opportunity to do so does not appear to be perfectly ripe at the moment.

Subtleties abound in this presentation, including a discussion of some of the more subjective distinctions between “internal” and “external” peaks. Sometimes it’s hard to tell the difference, but if you view this recording the task will probably become easier. We looked at Gold, Crude and the E-Mini S&P, and subsequent price action in each bore out our analysis. The lesson ended with scrutiny of HUI’s longer-term charts, which suggest that bulls may need to be very patient, perhaps for yet more months.

Silver would be demonstrating subtle power if it were to pop slightly above the two peaks show.  If it does and then pulls back even momentarily into a valid b-c, be ready to attempt a camouflage entry at the conventional point x.  I've sketched this out so that pivoteeers know exactly what to look for. I'd encourage you to share this knowledge in the chat room if you're on top of it.  _______ UPDATE:  Silver fell overnight, negating our trade before recovering into the close.

A minor midpoint support at 1101.30 looks usable for bottom-fishing with a stop-loss as tight as 1100.70, provided the point 'C' of the pattern, 1108.80, has not been exceeded to the upside first.  A breach of the pivot would imply more short-term weakness to at least 1093.90.  If you're looking for a decisively bullish turn, set an alert today at 1125.90.  _______ UPDATE: The futures sliced through both pivots enroute to a 1090.20 low intraday.  An interim bounce from 1099.60 would have stopped out the long for a trading loss of $60 (or so).

The Dow looks like it's setting up for a second consecutive 100-point decline. I've sketched it out on the 15-minute chart, and you can assume that a precise bounce from the indicated midpoint would portend a follow-through precisely to the target once 'p' is breached. The pattern cannot be interpolated to trade the futures, however, since they were wafting blithely above point 'C'  Tuesday night.

Uncomfortable as I am seeing the stock market's glass as half-full these days, it's hard to fathom that the Dow was off by a mere hundred points yesterday.  What with all the bad news, including horrific consumer confidence numbers, we might have looked for losses twice as large as those that occurred.  And now, true to form, the mini-indexes are getting short-squeeze Tuesday night, albeit only mildly so far. There are two modest targets just above -- at 1099.25 and 1102.50 -- but if the second is brushed aside, that would hint of a rough opening hour on Wednesday for bears.  If the futures fall, though, you should use the pattern in the chart to gauge the strength of the downtrend.  A failure to bounce at the midpoint would be telegraphing more weakness over the near term.  Please note that if the pattern plays out more or less as drawn, causing 'P' to occur, so to speak, in the middle of nowhere, you can try bottom-fishing with a stop-loss as tight as three ticks.

Consumer confidence plunged more than 10 points in February, even as it was reported that Wall Street bonuses rose 17% in 2009.  If a seer had told us a year ago that the two stories would run side-by-side on the same day, we’d have predicted there’d be rioting in the streets.  Instead, the streets were calm, at least as far as we could tell, and investors took the news in stride, sending the Dow down a measly 100 points. We can recall a time not long ago when the stock market might have shown more deference toward such grim economic news. No longer, apparently. What do consumers know, anyway?  The mere fact of the Dow trading above 10,000 must mean U.S. households were just having a bad hair day when the consumer survey was conducted, right?     Whatever the case, few could have been surprised by reports of the collapse in consumer confidence, investors least of all.  Like you and I, even the smug Lords of Wall Street are capable of judging for themselves whether the economy is indeed recovering.  For most of us, in fact, despite shamelessly irresponsible economic cheerleading by the news media, signs of deep, and still-deepening recession, are all around us. Stores large and small are closing at an unprecedented rate and mounting vacancies have turned many malls into ghost towns. In every city and town, restaurants that have thrived for ten, twenty or even thirty years have thrown in the towel. Sweeping budget cuts are being contemplated at all levels of government save Federal, on top of the unprecedented cuts that have already been made. And in our individual lives, we are all working harder than ever just to stay in place. Subprime’s Frankenstein And yet, any news story that is not flat-out negative