Friday, May 14, 2010

The overnight wait could distract sufficiently from the obviousness of this pattern to make it an easy winner.  I haven't furnished a specific entry price because actual price action may differ from the sketch, but the idea of it is that a trigger at 'X' within the first hour or so of Friday's session has good potential to provide a relatively low-risk play to at least the midpoint support.  If you simply want to use this set-up analytically, you can infer from a breach of 'X' that lower prices are imminent. _______ UPDATE (noon EDT):  Stocks plummeted from the opening bar, so the only way in -- and not a very good way -- was to short at the bell using a market order.

If the futures relapse, look to go bottom-fishing at exactly 72.72.  That's two cents above the 'D' target of a minor downtrend, and a 5-cent stop-loss is what this trade's worth.  If the stop is hit, the next promising opportunity, as well as minimum downside objective, would be at exactly 71.36.  You can find these targets on the hourly chart,  using,  respectively, A=80.32, or 81.66.

Take a look at the chart and see if you don't feel the weight of the nascent correction as well as the magnetic pull of the indicated midpoint support at 1098.75.  The picture could change with a rally above the existing point 'C', but for now, I'm banking on a correction down to at least 1098.75.  That would be equivalent to more than 300 Dow points, so we should look for low-risk opportunities to surf the trend early in its development.  Specifically, I'd suggest focusing on the 3-minute chart, using bearish impulse legs that follow uptrending failures to reach their targets. ______ UPDATE (11:54 a.m. EDT):  The futures have indeed plunged, tallying losses so far this morning that are equal to a little more than half of what had been predicted.  The 1098.75 midpoint support remains valid and should be viewed as a good place to attempt some aggressive, tightly stopped buying.  Shorts from last night's highs should be scaled in with the 1098.75 objective in mind.

Silver's best efforts to terrorize the bulls cannot mask the obvious fact that it wants to go higher.  Most recently, it plummeted 50 cents from the dangerous encouragement of a fleeting peak recorded Thursday morning, bottoming so far just half-a-penny beneath the midpoint support shown in the chart. The overshoot is not sufficient for us to infer that its 19.085 'd' sibling will be reached, but that is still a minor consideration at this point.  Note that the right-most price bars offer not only an incipient camouflage entry opportunity with the uptrend, but evidence of how much trouble bears are having selling Silver down this evening. (Late note:  The micro-uptrend died in the stretch, but that doesn't negate the prospect of a second, similar opportunity developing overnight.) _______ UPDATE (11:46 a.m. EDT):  Silver has come down hard this morning, plummeting 70 cents but without the gratuitous head-fake we saw in Gold.  The selloff is impulsive on the hourly chart, so we'll need to respect the bears until we get a test of a c-d midpoint support that can tell us how determined they are.

Gold has been delivering the goods lately with such easy aplomb that we needn't burden ourselves from day to day with a high standard of proof.  So let it be merely for the sake of enjoyment that we contemplate today's chart, which evinces the carefree spirit of an energetic and healthy bull market.  Specifically, we should look for the downward arc of Thursday evening's so-far picture-perfect correction to reverse from the c-d midpoint (aka 'p') or higher.  There are of course no guarantees in this game, but bargain hunters should look to get aboard, ideally before the start of Friday's regular session, via a 1231.20 bid, stop 1230.70.  This tactic will remain valid as long as the 1239.30 point 'C' of the pattern remains intact. ______ UPDATE (11:41 a.m. EDT:  Wow.  We sometimes need to remind ourselves that a healthy bull is so obvious to all that it must necessarily vex, frustrate and even defenestrate seekers of easy profits by turning vicious without warning.  This the futures did last night, spiking just before dawn to a 1249.70 breakout high just 50 cents above Wednesday's summit; then, going into a power dive that shed $32 of valuation in a relative trice.  Our would-be bottom-fishing tactic was negated by these histrionics, sparing us anguish and pain but in no way compromising a still-bullish picture.

[We wrote here recently that last week’s panic attack on Wall Street is unlikely to be the last.  The markets have since rallied strongly, but that won’t change the outlook, says a wise friend of ours who has been following the markets for thirty years. In the essay below, he explains why shouting “Fire!” on Wall Street is not quite the same as shouting “Fire!” in a crowded theater. RA] “Many years ago, while reading John Kenneth Galbraith in “The Speculative Episode,” it dawned on me that the world wasn’t necessarily becoming a safer place, particularly on Broad and Wall. If you think about military history, we’ve gone from flintlocks during the Revolutionary War with a range of 40 feet to the Spencer Repeating Carbine at Pickett’s Charge in the Civil War (every Confederate soldier died), to Hiroshima. On Wall Street, we went from the ticker tape running three hours late on 16 million shares in 1929 to program trading in 1987 when we didn’t have the Internet and you had to call your broker to know what was happening that day in the market. “Today, everyone has a quote in the corner of their screen at work or they watch CNBC at home. They are responsible for allocating their 401K online and many trade the rest of their nest eggs there too. The data processing capabilities out there can handle tens of billions of sell orders in a single day and on top of that, we have the CBOE and the E-Mini. Algorithmic Trading programs do umpteen trades a millisecond and make up 70% of the volume, one HAL versus another. Technology Produces No Buyers “The biggest problem, getting back to Galbraith, is that in the process of facilitating sellers, all the new technology does not produce any buyers. I