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COMMENTARY for Friday
TODAY'S ACTION for Monday
Rick's Picks for Monday
We’re using a midpoint pivot at 1098.75 as a minimum downside objective. It comes from the intraday charts and proceeds from a one-off A=1208 (April 30) as the starting point. The support looks too valuable and tradable to risk wasting with a micro-tight stop-loss, so we should try to get long using camouflage. In practice this will mean zooming in on the lesser charts if and when the futures reach 1101.00 or so. Thereafter, any valid impulse leg on the 3-minute chart or less should be used for aggressive buying with the penny-ante stop-loss that would apply. Anyone still short from above, when the target was first broached, should continue to scale in contracts or use a dynamic trailing stop. _______ UPDATE (2:28 a.m. EDT): The futures were trying to consolidate after selling off the equivalent of about 120 Dow points. This will make camouflage buying near 1098.75 the only way to go if you attempt to bottom-fish, since the tempo of the selling may have increased significantly by then. Anything below 1098.75 would yield a new short-term target at 1088.00, equivalent to about 400 Dow points.
A midpoint Hidden Pivot support at 10258 is equivalent to the one at 1098.75 given for the E-Mini S&Ps. Camouflage entry is suggested for initiating long positions near the target, but if you’d prefer to get long with a straight limit order, bid 10261, stop 10254. This implies that you could take partial profits on a multilot position as early as 10282 — 21 ticks above the entry — since the initial theoretical risk is seven ticks. ______ UPDATE (2:38 a.m. EDT): The futures are getting hit too hard tonight to suggest this is just a routine Sunday-night gangsta shakedown. Use a camouflage strategy if you try bottom-fishing at 10258, but be prepared for the selling to continue down to at least 10232 if 10258 fails as support.
Bears seemed outmatched trying to push this correction down to a modest, 1222.40 Hidden Pivot support identified Friday in the chat room, and they will be defeated if the futures go just a tad higher Sunday night, exceeding the 1237.90 point ‘C’ of the retracement abc. But check out the five-minute chart (inset) if you want to see why they had better run for the hills if the rally prints 1240.00, a tick above a subtle but important look-to-the-left peak. ______ UPDATE (2:44 a.m. EDT): The futures have traded as high as 1242.80; now watch how quickly they get to 1282.40!
Bears appear to be struggling and have so far been unable to correct the futures down to an abc midpoint. It wouldn’t take much for the bulls to run the July contract up their ol’ wazoos: a print at 19.475, actually — just one thin dime above Friday’s top. As of around 8:35 p.m. EDT Sunday night, there were no good handholds for a camouflaged long entry on the lesser charts — only dueling impulse legs that promised to test the patience of bullish traders. _______ UPDATE (2:48 a.m. EDT): If Gold and Silver continue to diverge tonight, night owls can try bottom-fishing at 19.065 with a stop-loss as tight as four ticks. ______ FURTHER UPDATE (1:27 p.m. EDT): The bounce came from 19.03, stopping us out for a small loss and telegraphing the weakness that was to follow. Current signs indicate a potentially tradable low at 18.575, my worst-case downside target for the very short-term. One other possible turning point worth mentioning: 18.685.
A Hidden Pivot resistance at 576.19 seems reasonable for the next 5-6 weeks if not sooner. Long-term traders please note: The target’s midpoint sibling lies at 469.72, and any pullback to that level should fully correct the Gold Bugs Index for the next intermediate move. More immediately, a booster thrust of at least 15.62 points is needed to launch a rally to as high as 534.35. This target was derived from the daily chart, where A=439.68 on May 5.
Friday’s slippage beneath a Hidden Pivot midpoint support at 72.19 implies the futures could now fall to as low as 65.87 over the near term. That target will not be particularly useful for bottom-fishing, since it is too close to a “structural” support at 65.66 created last July. However, the two numbers taken together suggest a likely test, with quite bearish implications if the implied double support fails.
The futures look like they will fall to at least 1.1940 before bulls get any significant respite. In the meantime, we can use the midpoint sibling of that number, 1.2519, to get short if the opportunity arises; or a 1.2265 Hidden Pivot support to get long today in a downdraft. However, we should also set an alert today and tomorrow at 1.244 to warn of a potentially powerful short squeeze. That is where the 3-minute chart would turn decisively bullish (see inset). _____ UPDATE (2:56 a.m. EDT): Shortly after midnight the euro was in an oversold rally after getting crushed down to 1.2235. This strengthens the case for a collapse down to1.1940, but in the meantime the futures would need to rally above 1.2577 to turn the hourly chart bullish. _______FURTHER UPDATE: As a result of Monday’s price action, it would now take only a push above 1.2385 today to turn the hourly chart bullish.
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Take any dozen good reasons for being bearish right now and they still don’t equal the bullishness of the chart shown. The undeniably compelling rally objective is 13085, a 4.8% move from current levels, and one can only surmise that the dusting the 12158 midpoint received on the last pullback (12/28) all but clinched a finishing stroke to the higher number. Moreover, it implies that bears shouldn’t get their hopes too high even if, in the next few days, the Dow plummets 324 points to retest the midpoint support. As of now, that would signal not weakness, but a screaming opportunity to get long. Hard to believe, really, but that’s what the charts say.
This Just In... for Monday
The Deepwater Horizon blowout could conceivably grow into the most catastrophic event in human history. That is the implication of an analysis published at rense.com that was authored by someone who seems to know his way around an oil rig. Click here for the full story.
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Why Traders Get Trapped in a Panic
by Rick Ackerman on May 14, 2010 12:01 am GMT · 14 comments
[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 » Read the full article