So, was it thinking machines that put stocks into a death dive last week, or was it primal human fear? Either way, there’s a neurological disease at work and therefore little likelihood of a cure. Even worse, since these diseases tend to be degenerative, we should expect something still more disruptive in the future. Ham-handed regulations won’t be able to stop it, either. Let the exchanges install all the circuit breakers they want; supply will out someday, catastrophically overwhelming demand when buyers go AWOL. This is inevitable when you create a global electronic trading network connecting ten billion » Read the full article
Early Sunday evening, index futures were caught in a vicious short-squeeze that bids fair to recapture all of last Thursday’s losses. It would seem to be drawing its energy from the latest — and rather large, even by American standards — European bailout package. The loan guarantees just announced amount to some $560 billion, offered to the EU’s most troubled economies. This PR hoax could have legs, but from a trading standpoint it will lay an egg if it fails to push the E-Mini S&Ps above 1136.00. That is Thursday’s recovery high, and it lies somewhat above the 1130.75 peak achieved so far this evening. The futures are currently trading for 1122.50, equivalent to a 140-point rally in the Dow above Friday’s settlement price. _______ UPDATE (2:32 a.m. EDT): DaScumballs are doing what they’ve been doing so very deftly since March 2009: lifting index futures as high as they can get away with on razor-thin Sunday night volume. From a Hidden Pivot standpoint, DaBoyz can get away with as much, perhaps, as 1170.75.
Friday’s robust thrust fell ten dollars shy of a 1224.70 target, subjecting Gold to a little more bullying than usual Sunday evening. We can ignore it as long as the futures hold above 1189.20, but anything below that number will create a mildly bearish impulse leg on the hourly chart. If there’s opportunity brewing for night owls, it would likely come from the 15-minute chart (shown). The modest downtrend has a midpoint pivot at 1195.80 that you can bottom-fish with a three-tick stop-loss, and another Hidden Pivot at 1188.90 that deserves the same treatment. Both lie just below “structural” supports whose breach will be read by most traders as breakdowns. _______ UPDATE (2:21 a.m. EDT): A rally Sunday night invalidated the two downside targets but created two new ones. The first is a midpoint support at 1198.60 that has already been breached; the second, a ‘D’ target at 1190.70 that you can bottom-fish with a stop-loss as tight as four ticks. If it’s hit, look for more selling down to 1187.70, my worst-case low for today and another spot to try bottom-fishing with as tight a stop-loss as you can abide. _______ FURTHER UPDATE (8:57 a.m. EDT): The futures have exceeded 1187.70, bottoming so far at 1184.40 and hinting of still more weakness to come. They’d need to pop above 1206.50 today to undo the damage.
A print exceeding 18.910 today or tomorrow would kick the buying into high gear, creating a bullish impulse leg of daily-chart degree that would turn December’s watershed high at 19.420 into a sitting duck. Anything less, however, could strand Friday’s spike, leaving buyers to cool their heels in the wake of Friday’s spirited charge. More immediately, there are two spots where night owls might try bottom-fishing with a stop-loss as tight as three ticks: 18.235; or somewhat more conservatively, at 18.165. (Please note that numbers in boldface brown are usually ‘D’ targets of downtrends, while brown number in a lighter type-face are midpoint pivots. Uptrending targets and midpoints are similarly given in green, although I will sometimes use brown and green to highlight price points that are important though not Hidden Pivots.) _______ UPDATE (8 a.m. EDT): June Silver bottomed at 18.215, two cents below the higher target but well above the lower. I’ll record nothing done officially, but please note in any case that upside to as high as 19.415 over the near term has been signaled. Key resistance lies at 18.815, the Hidden Pivot midpoint associated with the target.
As of around 10 p.m. EDT Sunday, the futures looked bound for 10670, a shortable Hidden Pivot (albeit a relatively risky one; a more conservative short can be initiated at 10712). That would represent a 335-point gain over Friday’s close, and although it would not recoup last Thursday’s loss completely, it would handily exceed the day’s recovery high, creating an impressive bullish impulse leg in the process. _______ UPDATE (9:09 EDT): The rally now measures to as high as 10937, well above last Thursday’s pre-swoon high of 10865. A pullback in the meantime to (precisely) 10569, the target’s sibling midpoint, would telegraph the next thrust.
If Goldman drifts lower over the next 5-7 days, we’ll look to bottom-fish down at 136.11, the lowest Hidden Pivot target that can be derived from the intraday charts. If I can come up with a way to initiate the trade using a limit bid for some near-the-money call options, I’ll feature the trade as a Pick of the Day for all. _______ UPDATE (May 16): Scratch Goldman from the list of stocks we’ve been watching lately, since it has become too, too boring to deserve our time and attention. My minimum downside objective is now 135.35, and I’ll set an alert there, since the support will be worth bottom-fishing if it’s ever reached — which it will be.
More downside over the near-term to at least 15.865 (see inset) looks very likely, so traders should position from the short side. The opportunity may be past by morning, but night owls can use an entry trigger on the lesser charts (i.e., 5-minute bar or less) to get aboard. I’ve highlighted the relevant ABC pattern, which appears at the rightmost edge of the chart. ______ UPDATE (9:23 a.m. EDT): Anyone who got short as advised made a pile of money overnight without much stress. The futures have plummeted and are currently down about 63 cents, having recorded a so-far low at 15.635 that exceeded our target by by 23 cents.
The failure of Tuesday’s rally to reach the modest, 1260.30 Hidden Pivot target we were using as a minimum upside objective is not exactly a sign of robust health. The target remains theoretically viable because the point ‘C’ low at 1232.00 with which it is associated is still intact. However, the hourly chart has swung bearishly impulsive as a result of the ratcheting, two-day sell-off from the recent high at 1255.60. Short-term downside potential is to the 1232.30 target shown. If this Hidden Pivot support is easily breached, however, it would suggest more sellers are waiting in the wings. Alternatively, the futures would need to surpass 1246.30 without having first touched the 1239.30 midpoint support (see inset) to turn the hourly chart short-term bullish. _______ UPDATE (October 27, 8:01 p.m. EDT): I expect the next leg down to reach the 1216.40 Hidden Pivot support shown. Alternatively, a print today at 1236.30 would give bulls a fighting chance. _______ UPDATE (October 29, 1:23 p.m.): 1202.10 is my new downside target — a Hidden Pivot support identified during this morning’s weekly tutorial session. _______ UPDATE: An 1125.00 target broached yesterday during my regular interview with Al Korelin should suffice to keep you out of trouble. I hadn’t imagined the futures would get halfway there overnight.
Apple’s gap yesterday through the 100.41 midpoint resistance (see inset) strongly implies that its D sibling at 105.64 will be reached. Although a pullback to the midpoint should be treated as a belated buying opportunity, I wouldn’t suggest chasing the stock higher. That said, the four labeled peaks are tailor-made for the Hidden Pivot trader who can employ the ‘camouflage’ technique for getting long. If you understand why, you should go for it! _______ UPDATE (8:13 p.m.): The broad averages pulled Apple back down to earth yesterday when the stock tried to go opposite weakness that surfaced around mid-session. This runs flatly counter to my speculative idea that AAPL might pull the broad averages higher. That’s still possible, since yesterday’s 104.11 peak fell 53 cents of a rally target that remains valid in theory. However, we’ll eschew speculation for now and simply watch to see whether the 102.44 Hidden Pivot support holds (see inset, a new chart). _______ UPDATE (October 23, 1:59 p.m.): Apple has rebounded sharply today, off a 102.90 correction low to a so-far high of 105.05 that’s 59 cents shy of our target. Most longs should have been exited by now. ______ UPDATE (October 27, 8:07 p.m.): Friday’s high at 105.49 came within 0.15 of the target flagged above. Bulls can continue to hold small long positions for a swing at the fences, but I’d suggest tying your shares to a stop-loss based on a downtrending impulse leg on the 15-minute chart. Currently, that would imply stopping yourself out if an uncorrected fall touches 104.52. _______ UPDATE (October 28, 8:44 p.m.): Still long? Be alert at 107.08, a Hidden Pivot target that looks all but certain to be reached but which could stop the rally cold. You should tighten your trailing stop there in any case. ______ UPDATE (October 29, 9:25 p.m.): The rally has shredded some challenging Hidden Pivots, but let’s see if it can bully its way past the 109.07 target shown. In any case, it is my minimum upside objective for the near term.