March 2010

Bloodied bears should ponder the chart below before they surrender to the notion that stocks will continue to rise more or less forever. The first thing to notice is that the crash that followed October 2007’s all-time high came at a time when the Dow average had just pushed into the ozone, moving decisively above 14000 for the first time. It’s not hard to imagine bulls getting pretty fired up back then -- and bears getting ready to dive into their bomb shelters. It looked like a moon shot was under way, and, based on our proprietary Hidden Pivot method, we’d have laid odds that the Industrial Average was bound for at least 14600. Instead, the Dow peaked at 14198, 400 points shy of the target, before commencing an epic collapse to 6479 over the next 17 months.  The similarity between the topping pattern traced out in 2007 and the one taking shape now is hard to miss, as the chart shows. The main difference is that the earlier pattern was more massive. This time we are projecting a rally to at least 10886  on the Dow, exactly 118 points above yesterday’s high. But based on the way the stocks have been acting in recent days, we would expect more than a mere 118-pointer. For in fact, the rally has been shredding its way past Hidden Pivot targets in mere hours when those targets should have contained the move for at least a few days.  Yesterday, for instance, we told subscribers to short a “hidden resistance” at 1161.00, using a stop-loss at 1162.25 that left us exposed in theory to $62.50 of risk. By day’s end, however, the futures had traded as high as 1165.50, implying that buyers were not even breathing hard after sprinting almost without a break since February

What you and I have paid into Social Security has long since been spent, leaving only IOUs to fund our retirement.  Those IOUs are now coming due, since, for the first time in a generation, the Social Security system is projected to pay out more than it takes in -- about $29 billion more.  Read the story by clicking  here.

The Yen chart shows patterns pointing both up and down, one of which recently produced a bounce from very near its midpoint.  If this bounce is a prelude to yet lower prices, we might use the midpoint of the dueling pattern, at 1.1229, as a place to try to get short for a ride down.  This approach is valid so long as the bullish "C" point of 1.0984 is not revisited first.  (Posted by Doug McLagan)  ______ UPDATE (12:38 a.m. EST, March 18):  This tout has been superseded by the one dated March 18 and is no longer active.  Because we might make future reference to the chart attached to this tout, please note that the number 1.229 in the chart explanation should read 1.1229.

Tuesday's brief but precise bounce off of the midpoint of a bullish daily pattern gives us the confidence to recommend shorting the D target of 118^16.5 with a tight stop.  Traders should sell at 118^15 with a stop at 118^18.5, risking about $110. (Posted by Doug McLagan) _______ UPDATE (6:40 p.m.): Cancel the order, since the futures were having difficulty gaining altitude.  Two days later, they'd gone no higher than  117^17.

The Euro has continued to move up, consistent with our view that it has recently made a significant low.  But if it reaches a "D" target of 1.3900 soon, it will be overbought and due for a pullback.  We will short at 1.3899 with a stop at 1.3911, risking $150 and taking account of an alternate A point six pips below and just to the left of the one we are using, as shown on the attached chart. (Posted by Doug McLagan)  ______ UPDATE (12:42 a.m. EST, March 18):  This tout has been superseded by the one dated March 18 and is no longer active.

Because it took two tries to push past the 1128.30 peak recorded on March 10, we should temper our bullishness until there's more evidence.  That said, the futures are nonetheless masticating an 1126.00 midpoint resistance that I noted earlier in the chat room, even if they have not yet left it behind.  Once this occurs, the prospect of a run-up to exactly 1154.30 seems like a safe bet.  A camouflaged opportunity to get long could crop up via a pullback from somewhere between the peaks that were recorded on the way down between March 3-7.  All of the details noted herein are shown in the accompanying chart.

There  are two targets just above that look like enticing shorts.  The first lies at 1157.00, but I am wary of initiating a position there because the futures have already hit 1157.25 as of midnight and the night is still young.  The second lies at 1161.00 and would give us a little more cushion against what looks to be a developing short-squeeze. The risk is that the top will occur below our offer, perhaps at 1157.25.  In any event, I'll recommend offering two contracts short at 1161.00, stop 1162.25.  The chart shows the two relevant patterns.

Irrespective of whether the Dow is about to rally 239 points to tie the 1930 recovery, we should try to short this vehicle when it reaches the 48.12 target shown in the chart. Buy four April 48 puts, which should be selling for around 0.90 at the time, no stop-loss.

We caught a slice of hell during this session, since an E-Mini short that had been recommended as a tout was in the process of getting stopped out just above our entry price. Segueing to a Dow chart, we were able to see why no bear in his right mind can afford to be short the broad averages right now, other than for purposes of day- or swing-trading. Poring over some Comex Gold charts, we found signs of underlying strength, though no compelling reason for being wildly bullish.