Monday, May 3, 2010

Two patterns embedded within the Euro's recent decline point to essentially the same "D" target, which looks buyable.  The Euro spent the second half of April declining to new lows for 2010, cancelling another rally attempt and renewing its multi-month downtrend.  Within this recent decline are two valid and active patterns, one of which is especially appealing, whose "D" targets differ by only one pip.  The better pattern aims for 1.2935.  Traders should risk $125 per contract in the June futures by buying at 1.2938 with a stop at 1.2928. (Posted by Doug McLagan)  _______ UPDATE (10:25 p.m. EDT):  The Euro futures missed our recommended entry price by one pip this evening and have spent more than an hour tracing out a familiar bottoming pattern: a quick pop up, a re-test of the low which bottoms slightly higher, and as we write, an acceleration upward.  We will invoke the "no sloppy seconds" rule at this point and cancel the recommendation, as the odds in our favor are now much diminished.  We do want to point out that for both of the patterns in question, the low was more than 99% of the way from "C" to "D".

All charts point higher, but it will be most useful to settle on one that can tell us how high the current, minor cycle is likely to go.  The pattern I like comes from the weekly chart (see inset) and yields a Hidden Pivot target at 1208.80. We'll use that number as our minimum upside objective for the near term -- and please note that I consider this a very high-confidence call.  A pullback  to 1166.60 should be considered felicitous, since that's the midpoint associated with our rally target and therefore an excellent place to attempt to augment long positions.

By monitoring the Dow and the E-Mini S&P closely, we should be able to determine soon whether stocks have merely stalled or are instead about to go into a nasty dive.  The Dow Average could come down to as low as 10905 and still be considered in a "healthy" correction, but if it cracks 10844 by midweek or so, that would be warning "investors" to reef the sails.

Europe was putting the finishing touches on yet another bailout for Greece over the weekend, even as new scrutiny fell upon the growing problems of Spain and Portugal. Under the latest rescue package, the IMF and 15 nations – presumably including Spain and Portugal – will pony up $133 billion to keep Greece from defaulting. Will that be enough?  Although it more than doubles the amount of an emergency credit line extended to Greece less than two weeks ago, some observers think it could take as much as $700 billion to avoid bankruptcy.  One thing’s for sure:  For the average worker, the austerity measures imposed on Greece by this rescue package seem as harsh as chemotherapy. “We find ourselves before the most savage, unprovoked and unjust attack,” said the head of the nation’s civil service union after seeing an outline of the cuts. Unfortunately, there are no guarantees that even severe belt-tightening will work. “There is a very real possibility that at the end of two or three years, Greece will still have an unsustainable debt and will have to restructure because it will have a deep, deep recession in the meantime,” noted a Berkeley economic professor quoted by Bloomberg.  Considering that riots started breaking out in Greece when relatively mild austerity measures were being talked about a couple of months ago, it seems plausible that the country could be in for a long, hot summer. 17,000 Swimming Pools Ironically, there is supposedly enough wealth in Greece to have headed off the crisis in the first place -- wealth generated by a shadow economy representing 20 to 30 percent of the nation’s GDP. Alas, tax evaders may be costing the country as much as $30 billion a year, according to estimates. In a wealthy Athens suburb, according to the New

We hold 800 shares with an adjusted cost basis of 11.75 against eight May 18 calls that we shorted for 0.64.  The covered write limits our upside participation above 18.64, so we may try to buy May 19 calls to get back in the game:  not immediately, however, because Friday's high came within pennies of a Hidden Pivot target that should give way to a correction of this by-now parabolic rally. _______ UPDATE:  Do nothing further right now, since I don't fancy covering a covered write when the underlying stock is in a parabolic move. I might have advised doing so earlier if I'd noticed that the April 15 high had impulsed above the 17.80 peak notched on January 11 (see chart). Instead, I was asleep at the wheel, missing archival-quality camouflage that became manifest on the $1.03 pullback that followed this very subtle breakout. 

There's no rally target for Silver precisely analogous to the 1208.80 pivot I've flagged in Gold, but the one that comes closest lies at 19.545, a nickel above last December's watershed high.  Greater clarity can be found on the hourly chart, which says the futures are bound for at least 19.530.  If they noodle around the midpoint at 18.510, we should look for opportunities to buy there JUST before SI takes off.

Detour Gold was one of Chuck Cohen's picks from around $10 a share.  Whether you bought the stock on his say-so or acquired it on your own, please note that it currently targets 24.417, a few pennies shy of last July's key top.  The way the stock has been steaming toward that peak, there's little doubt it plans to challenge it.

If the gratuitous slop of the last three weeks resolves to the downside, the first place you might step in with a cautious bid would be 1168.25, a Hidden Pivot derived from last week's high. Please note that that's somewhat below "structural" support from a low at 1771.00 recorded on April 8.

Friday's slide brought the Dow down to within about 18 points of a minor Hidden Pivot target at 10982, and you can use that support to try some tightly stopped bottom-fishing if the Mini-Dow hasn't gotten hit too hard Sunday night. Night owls please note that the corresponding low for the Mini-Dow would be at 10,928. If the Dow falls beneath the support, look for weakness to prevail down to at least 10944.83, another possible turnaround spot that can be bottom-fished with a very tight stop-loss. _______ UPDATE:  The futures opened firm and went higher, so we did nothing.