Tuesday, April 6, 2010

We're using a Hidden Pivot at 1196.50 in the E-Mini S&P as a benchmark for the market as a whole.  The rally appears, paradoxically, to be unstoppable but half-hearted at the same time.  That's because nearly all of the buying has been short-covering driven by very thinly traded rallies in the after-hours.

Target presumably has been bound for a potential major top at 56.26 since last July, when it embarked on a follow-through rally on the heels of an impulsive, 80% gain last spring.  I'll recommend bidding for four May 56 puts if and when the stock reaches 56.10, but stay tuned for updates, since it may be possible to hone our bid price down to a fine science when the Hidden Pivot is closely approached. ______ UPDATE: Ha-ha the joke's on us there are no May 56 puts.  Instead, let's try to buy two May 55 puts for 1.31.  They've traded as low as 1.29 and are currently offered at 1.36 off a rapaciously wide spread of 1.29-1.36.

Steel yourself for the news media's inevitable drum roll-and-kazoo tribute when the Dow closes above 11000 for the first time in more than a year-and-a-half.  The exact number to expect -- a shortable, potential top at exactly 11077.17 -- is a Hidden Pivot derived from a pattern similar to the one that produced the 1196.50 target in the E-Mini S&P.  It is a resistance of only middling importance, and although it could ultimately prove to be something more than that, this opportunity should not be considered a bet-the-ranch proposition. _______ UPDATE:  The trade was a non-starter, strictly speaking, since the first tradable selloff , a 38-pointer,  came just after an 11075 high -- two points below our short offer.  Next likely stop, according to our Hidden Pivot runes:  11,163.92.

The futures made slight headway toward the 1196.50 target flagged here yesterday.  Longs may find it difficult to board, since the uptrend has unfolded in fitful spasms sandwiched between wholly unengaging stretches of monotony.  The target remains shortable nonetheless, and you can use a stop-loss as tight as 1198.25.  The trade is less than optimal because the Hidden Pivot is so close to widely anticipated round-number resistance at 1200.

Although the futures failed to reach our bullish benchmark at 1142.40, they made constructive headway nonetheless by refreshing the uptrend on the hourly chart.  This was accomplished via a thrust above the 1128.10 peak recorded March 19 on the way down, and it created a bullish target at 1136.00.  Buyers have yet to push the futures above that number's sibling midpoint, 1128.40, but when they do, we should infer more upside to at least 1136.00 over the near term.  That would be especially welcome, since it would eclipse a moderately important peak at 1135.00 recorded on St. Patrick's Day. _______ UPDATE (Monday night):  Buyers spiked the futures to 1134.30 during the day session, leaving the 1136.00 target in play theoretically even if it is no longer tradable. It is mildly negative that the intraday peak failed to get past St. Patrick's Day's 1135.00 high.

Schizophrenia still reigns at the Fed as policymakers attempt to head off an inflation that, statistically speaking, is almost nowhere to be found. In fact, inflation has fallen by more than half since 2007 if you measure it the way the Fed prefers, using a price index of personal consumption expenditures. What is the diligent monetarist supposed to do?  While some of the Fed governors see the glass as half-empty and want to keep interest rates low, their delusionally sunny colleagues want to tighten because they evidently believe all of the twaddle we’ve been reading about how the economy is in the throes of a strong recovery.  Consider the following headlines from Google’s business-news section yesterday afternoon: “Bets on Growth Buttress Stocks” (Wall Street Journal); “Oil Surges to 17-Month High on Signs of U.S. Economic Growth” (Bloomberg): and, “10-Year Yields Hits 4 Percent on Signs Economy Picking Up” (Reuters). To borrow a line from Goebbels, if the news media keep trying to mislead us with stories like these, eventually we will come to believe them. Or will we?  It’s one thing for the Wall Street Journal et al. to get all stoked about the supposedly robust pace of the recovery.  After all, the Journal’s owner, Rupert Murdoch, didn’t get rich telling readers the world was going to hell in a hand basket. But just because Murdoch has chosen to be a cheerleader rather than risk circulation and advertising revenues by giving it to us straight, that doesn’t necessarily mean that we readers have to believe such bilge. Why should we, when there is no hard evidence of a recovery in the economic lives and businesses that we see, and hear about, all around us? Behind the Headlines Could the newspapers simply be misinterpreting the signs?  It would certainly seem that