Friday, May 28, 2010

Although the Dollar Index has spent the last two weeks meandering sideways, it has nothing to prove at this point, since the heavy lifting has already been done.  This was true  a week ago, when DXY stabbed above a key peak at 86.87 recorded in April 2009.  The consolidation from the recent high at 87.46 could come down to as low as 82.86 without disturbing the long-term bullish case at all, but in any event, another powerful leg up would be signaled by a "booster-stage" rally of 1.86 points.

The futures appeared bound for at least 18.890 over the near term, having demolished that Hidden Pivot's midpoint sibling at 18.450 earlier in the day.  A move to the target would be especially good news provided bulls don't give back too much of it back, since a close merely above 18.795 will shorten the odds of a thrust to a major target at 20.170 noted here earlier.

The futures spent the whole day obsessing over an important midpoint Hidden Pivot at 1214.90 that was flagged in yesterday's tout.  A two-day close above it is still needed to signal a likely thrust to 1261.80, but a stab above a prior peak at 1222.30 would likely also do the trick.  Amidst all the noise on Thursday, the futures could muster only 1220.60.  Night owls can try bottom-fishing at 1210.90, stop 1210.40.  This is the 'd' target of a corrective pattern taken from the 5-minute chart, where a=1217.10. (See also: our recent gold coverage)

Short-squeeze mania was at its most powerful yesterday, pumped to-the-max ahead of the three-day holiday weekend.  The hysteria pushed the futures somewhat above a 1098.75 midpoint pivot that we were using as a minimum correction target.  The actual high so far has been 1104.00 -- an overshoot sufficient to imply that buyers are likely to dominate once again today.  Even so, the very difficulty of getting short on a Friday preceding Memorial Day compels us to try. I'd suggest using camouflage patterns on the three-minute chart to do so, although the one-size-fits-all solution would be to buy a put-option "lottery ticket" at the closing bell if the broad averages are at or near their intraday highs. This should not be done in size, since it is a pure speculation, presumably unsupported Hidden Pivot factors.

We may all be breathing a sigh of relief by the time you read this, but it remained uncertain at press time whether British Petroleum’s efforts to plug a massive oil leak in the Gulf of Mexico would succeed. Earlier in the day, the company began pumping a heavy fluid called “mud” into the damaged well, but the process was temporarily halted because the high-powered flow of oil and gas from the well was causing too much of the mud to escape.  BP said such delays had been expected but that they hoped to resume the sealing operation by late tonight.  The effort came amidst reports that oil has been gushing from the well at a rate much greater than what BP had first estimated. The company originally said that about 5,000 barrels of oil were escaping per day, but the latest estimates suggest that the true number is somewhere between 12,000 and 19,000 barrels. Converted into gallons, that implies that as much as 760,000 gallons of oil per day are flowing into the Gulf. Last week, we linked at Rick’s Picks a very scary article from rense.com that said the “top kill” procedure being used to plug the well was the world’s last hope to get the disaster under control.  The author, who sounded like he knew a thing or two about drilling platforms, explained that abrasive material contained in the gushing oil could eventually widen the well-hole so that virtually unlimited quantities of oil and explosive methane would be released into the water and atmosphere. We would strongly suggest that you read the article to understand what is at stake if BP’s effort fails. The only alternative at that point would be to drill an additional well to relieve the pressure.  This procedure is already under way, but