Wednesday, April 28, 2010

The Dow sliced through a midpoint support at 11012 yesterday with no discernible pause even on the 15-minute chart. This implies further slippage to 10914, the support's 'D' sibling.  Shorts should be considered on a bounce to 11012, but if you decide to jump in, use the lesser charts for locating a minor-rally Hidden Pivot or a downtrending 'X'.  If trading the futures, you can bottom-fish at 10858, stop 10851. ______ UPDATE:  A gap up to 11039 on the opening bar didn't give us much opportunity to get in trouble.  Subsequent action was pretty wild, suggesting that traders don't know quite what to make of Europe's troubles.  But price movement was up nonetheless -- business as usual, perhaps, with an irresistable  tide of OPM driving stocks higher no matter what the news or its implications.

Greece's problems were not even mentioned tonight during news anchor Brian Williams' summary of the headlines at the beginning of his broadcast. Perhaps stock market junkies are the only ones who care?  A report on Greece was included in the 30-minute news wrap-up,  however, and it was properly nuanced to illuminate the most scary details.

Goldman did not get clobbered yesterday by the selling that brought the broad averages down. Instead, it bottomed just 85 cents below a key Hidden Pivot support at 151.00 that I'd identified earlier. It will of course take more than that to turn the stock market around, but we shouldn't dismiss the psychological importance of this stock's resisting the bearish tide -- especially when the company itself was getting clobbered by an inquisition on Capitol Hill as stocks were dropping.  Some subscribers evidently made hay with the forecast, although it took guts to ignore what was going on elsewhere in the market.  Looking just ahead, the stock will need to hit 157.96 to further distance itself from jeopardy. The trend was down at the close, and GS appeared to be holding on by a thread.

A print down at 1170.75 today would turn the daily chart quite bearish. Coincidentally, yesterday's downdraft pointed to a minimum 1170.25. The midpoint sibling of that Hidden Pivot, 1182.50, has already been violated decisively, so we should expect the selling to continue into Wednesday, at least.

June Gold came through for us with flying colors yesterday, achieving every item on our technical wish list.  I did not stipulate that the futures had to close above the look-to-the-left peak at 1171.80, only that they exceed that number -- as indeed they did.  While this is no guarantee of significantly higher prices over the near term, it does give bulls a little more breathing room, since it would now take a print below 1132.00 to even faintly darken the outlook, and  below 1102.40 (aka "The Trouble Zone") to turn the picture outright bearish. If buyers are to seize the advantage in the days ahead, we should see price action that roughly conforms to what I've drawn on the chart.

Greece’s financial problems took a dramatic turn for the worse yesterday, causing stocks and bonds around the world to plummet on news that Greek bonds had been downgraded to junk by Standard & Poor’s. The rating agency’s decision was particularly unsettling for investors because just last week a $60 billion emergency credit line was extended to Greece by the IMF, Germany and other European nations. But what may have spooked the markets even more was S&P’s downgrade of Portuguese debt to A- from A+.  This suggests not only that euro-contagion is spreading, but also that any large sums of money pledged to ameliorate Greece’s crisis are no longer capable of calming the markets. Unfortunately, perceptions are everything at the moment, and it seems most doubtful that more talk, more promises and yet more loan guarantees will arrest the spread of fear.  Will the uneasiness eventually come to engulf several other nations thought to be on the financial ropes, notably Spain, Italy and Ireland? This seems a foregone conclusion, since there is no remedy possible that would address, let alone fix, their respective financial problems at a fundamental level. Indeed, for the central banks, the fatal paradox is that if any nation were to get truly serious about tackling its debt problems, the result would be an economically fatal debt deflation. Under the circumstances, it’s no wonder that our political leaders have bought into the lie that untold new sums of fiscal borrowing can reverse a debt deflation. In point of fact, untold sums of new borrowing have yet to cause even a blip in the home prices that were the explicit target of Fed stimulus. Weimar Memories No such remedies are likely to be attempted in Europe, since they would be subject to a German veto. To say that the