March 2010

At yesterday’s top, the Dow Industrial Average was a mere 239 points shy of equaling the six-month bear rally that followed the 1929 Crash.  The blue chip average peaked at 10694 on Tuesday, but it will need to hit 10933 to equal the fervently delusional retracement of the Great Crash to within 77% of the market's peak value.  At the rate the Dow has been climbing, it could be there by week’s end or early next, so place your bets. We’ve can identify one spot between here and 10933 where a short would enjoy favorable odds, but the gambit demands a tight stop-loss. The 1929 comparison turned up in the Rick’s Picks chat room yesterday, posted by “Emerald,” who modestly categorized it as historical trivia. Perhaps not, since these numbers are all we’ve got to measure the tidal surge of euphoria that washed over investors once a financial shock of unprecedented magnitude had been fully absorbed. As we know, those who bought into the rally, and who stuck with it, were proven to have been fools; for the stock market would eventually lose 90 percent of its value.  If this scenario were to repeat, it would imply a bottom for the Dow at 1420, representing a collapse of nearly 87% from current levels. Obviously, many of today’s investors are not reflecting on the lessons of history. For the record, the bear rally topped in April 1930, a fact that should give pause to those counting on springtime to fill investors’ hearts with lightness and song. Given the parlous state of the economy, which remains frozen despite a steroid-induced spike in GDP, it should be prayer on the lips of investors, not song. A Bullish Tizzy In retrospect, it’s hard to believe investors could have worked themselves into a bullish tizzy

After Friday's strong rally in the Euro, which exceeded three prior highs on the daily chart, the substantial Monday pullback should have us looking to get long for some bullish follow-through.  The "X" point shown on the chart is two pips below an important prior high at 1.3707, visible on the 15-minute and lower timeframes.  Traders should look for a pullback from just above that level to provide a buying opportunity based on a smaller pattern.  (Posted by Doug McLagan)

Index futures were slithering higher a little after 10 p.m. EST, putting pressure on shorts ahead of Tuesday's opening.  Perhaps Wall Street sniffs victory for Obama's health care plan?  You read it here first, but it's probably only a matter of time before some imbecile writes about it seriously elsewhere.

A 377.79 downside target given here earlier is still viable, but we can lower the bullish reversal threshold to 426.93 from 433.99, since that's where the hourly chart would turn positive again. If instead HUI heads lower, bottom-fishing at 399.46 would be a decent speculation. We'll make that our minimum downside target for now.

Stairstepping their way lower for nearly two weeks, the futures have noticeably failed to generate even an ounce of fear. A print today at 1128.30 would show bears who's boss, but failing that, look for more timid selling down to as low as 1088.00, where structural support from some prior lows exists.  A 1095.50 downside target remains viable, and you can try bottom-fishing there with a stop-loss as tight as 1094.90. 

What a stretch.  After struggling to go lower, stocks got short-squeezed back to unchanged in the final hour of the session. (Incidentally, the day's low was a nearly exact hit on the 'D' target of a pattern on the hourly chart.) To paraphrase Yogi Berra, it was deja view all over again -- for about the hundredth time.  Fortunately, we had profitably covered all but a single contract of the short position we'd established on Friday. Profit taking has raised our cost basis to 1177.00 (basis the June contract), implying that even if Mr Market does his very worst, we will come away with a handsome gain. Having rolled into the June contract yesterday, let's set a stop-loss at 1151.00.  This is slightly below Friday's peak, but just above a look-to-the-left high whose breach would be telegraphing a breakout. ______ UPDATE (1:01p.m. EST):  We covered at 1151.50, realizing a theoretical gain of $1275 per contract.  We'll continue to short this silly bear rally whenever a similarly juicy opportunity arises.

David Beckham reportedly was recuperating Monday after surgery in Finland to repair a torn Achilles tendon. We wish him well, since no other player has done so much to stimulate interest in the game in the USA. The Los Angeles Galaxy’s celebrated midfielder was on loan to an Italian team, AC Milan, playing in a game against Chievo Verona, when he stepped back awkwardly while taking a pass with his left foot. “He started hopping on his right foot with an expression of pain on his face,” according to a news report.   “He reached a hand down to his left heel, then stood up and gestured as if he was breaking a twig in half to show the AC Milan bench he knew the tendon was broken.” Considering how much strain the Achilles tendon absorbs, it can be amazingly fragile. My wife ruptured her Achilles tendon the same way Beckham did. She took an awkward step backward while playing ping-pong at a birthday party, and felt something go pop. I’d met her that same night and couldn’t understand why, after giving me her phone number, she didn’t return any of my messages for more than a week. I didn’t know it then, but she was in the hospital recuperating from surgery. She described the injury as the most painful thing she’d ever experienced.  The tendon eventually mended completely, but it took a long time for her to get comfortable doing things that put strain on it, particularly skiing. The 34-year-old Beckham, is undoubtedly in the care of one of the best surgeons in the world, and so a Galaxy spokesman’s claim that he will return to top form seems credible.  But it will still take time – at least three months -- before he can put even mild strain on

From the Associated Press,  the latest development concerning James Sikes' alleged 94 mph thrill ride: SAN DIEGO — Toyota is casting doubt on a man's claim that his Prius sped out of control, saying that his report is inconsistent with findings of the company's preliminary investigation.Toyota says the accelerator pedal was tested and found to be working normally and a backup safety system worked properly. The automaker says the front brakes showed severe wear and damage from overheating but the rear brakes and parking brake were in good condition. James Sikes says his car raced to 94 mph (150 kph) on a freeway near San Diego last week. The March 8 incident ended when Sikes stopped the car with help from a California Highway Patrol officer.

An attractive intraday pattern in the ten-year Treasury notes might offer a shorting opportunity at its D target of 117^15, which is just above the midpoint of an emerging pattern on the daily chart.  Traders should short at 117^13 with a stop at 117^17, risking $125.  The daily pattern begins at 115^14.5; the intraday pattern is shown in the attached chart.  If the C point of 116^24.5 is revisited, cancel the trade.  _______ UPDATE:  The futures went lower, negating the trade. (Posted by Doug McLagan)