Monday, June 28, 2010

Sunday night action is timid, although not so timid that DaBoyz thought twice about snatching back a four-point rally in the E-Mini S&Ps as of around 2 a.m. EDT.  Gold and Silver are quiet, but there appears to be plenty of power underneath if sellers should put some impediments in the way.

Let me reiterate the 18.39 downside target first broached here a while back.  That's where BP is going at a minimum, and it is the Hidden Pivot target of a long-term trend off the weekly chart. A lesser pattern implies 18.05, suggesting we'll be able to do some bottom-fishing within a fairly narrow range just above 18.00. In the meantime, the stock's down(fall) has been too brutal for easy shorting along the way down, although it's still possible to squeeze off a low-risk shot intraday if you play close heed to a-b impulse legs on the 5-minute chart. _____ UPDATE (July 9): BP's two-week rally is just shy of invalidating the 18.39 target.  That would take a move above 34.46 -- point 'C', recorded June 11 on the way down; the so-far recovery high has been 33.90.

Silver has been routinely exceeding our bullish benchmarks on the lesser chart, so perhaps it's a good time to reiterate a 21.53 target that comes from the weekly (A=12.665 in  July 2009).  The sibling midpoint of that Hidden Pivot lies at 18.150, so any pullback to that price should be viewed as a possible buying opportunity, although entry should be made using camouflage within a minor uptrend rather than via a mechanical bid at the pivot.

All signs were "go" as trading drew to a close on Friday, with a Hidden Pivot at 1272.60 still our minimum objective for the near term. If the futures trade more than 0.50 above that number intraday, however, or close above it, you can be confident that the rally will continue to at least 1293.50. The pullback from that last Hidden Pivot should be precise because its sibling at 1230.75 has already shown precise stopping power. Accordingly, if you plan to adjust your long position or take partial profits, don't assume that an instant test of resistance at 1300 is a done deal merely because the futures have pushed above 1290. _______ UPDATE 1:40 p.m. EDT):  Yet another gratuitous shakedown, and it's enough to make one wonder whether these orchestrated selloffs need to be so brutal just to make a point. The drop was close to $30, and it created a nasty impulse leg on the hourly chart. The low so far has been 1235.90, but the selling would need to hit 1216.10 before Wednesday to become impulsive on the daily chart.  For what it's worth, the mini-avalanche was telegraphed to some extent by the failure of the intraday high to surpass a secondary peak at 1264.80 recorded on June 21.  I remarked on this in the chat room when gold was down just $5, but I did not imagine the severity of the selling that was yet to come.

June's three-week slide is bearishly impulsive on the daily chart, but there's not enough clarity on the intraday charts to map out the swing lows DXY is likely to carve out on the way down. My guess is that the next big leg will achieve a minimum 83.86, an approximately 2.3%  fall from these levels.  If so, the crucial midpoint support lies at 85.14, and a bounce off it would tend to corroborate the target itself.  _______ UPDATE (9:58 a.m. EDT):  DXY has bounced from 85.21 -- close enough to the midpoint support for us to infer that the Hidden Pivots are working.  A decisive breach of 85.14 should therefore be regarded as a warning of an imminent fall to 83.36.

It's difficult to recall a Sunday night when the futures were not being squeezed higher.  This con-job is pretty lame, though, at least so far, and it will need to get past a midpoint resistance at 1078.50 in any event to open a path to 1086.25, its sibling midpoint. Camouflage for the bull trade will be tough to find, since Friday's end-of-day rally has been in a shallow consolidation since, but you can short 1086.25 with a stop-loss as tight as 1.00 point. _______ UPDATE (10:04 a.m. EDT): The futures faked their way to 1079.75 overnight, exceeding the midpoint resistance noted above by 1.25 points. We'll categorize it as a midpoint failure nonetheless -- close enough for government work. The pullback has been feeble so far, however, suggesting that sellers and short-coverers will spend most or all of the day thumb-wrestling.

For spin-free analysis of the global economy, the Australia-based  The Privateer is one of our favorite reads. Amidst a cacophony of hubris and unwarranted optimism, its editor, William Buckler, provides a fact-filled perspective that reduces the mainstream media’s reports of “recovery” to drivel. Buckler notes drily that “the signs that the party is indeed almost over are all around us and becoming very difficult to ignore.”  The same goes for the U.S. dollar. When Nixon cut off foreign holders from redeeming dollars for gold in 1971, says Buckler, the U.S. initiated a reckless global experiment with fiat paper. “Forty years later, the bill for this adventure has come due,” he warns, “and there is nobody to pay for it.” Like Rick’s Picks, The Privateer regularly finds something to amuse in mainstream-news headlines on the topic of the economy. Here’s one that caught his eye -- and ours as well: “China Makes Good on Flexibility Vow – Yuan Falls”. As if any of the central banks actually support flexible markets. If it had been Hitler’s invasion of Poland that was being reported, the headline might have read, “Hitler Makes Good on Vow to Seek More Room for Germany”. Ominous Signs Recall that U.S. stocks got barely any lift from the news.  Abetted by short sellers caught on the ropes last Sunday night, DaBoyz and their pigeons were able to pretend for only a few hours that China’s decision to let the yuan rise was good news. Stocks all around the world rallied sharply if fleetingly, but by Monday morning most traders seem to have figured out that a pricier yen would subject global financial markets, particularly the U.S. dollar, to killing stress. The Dow Industrials fell steadily for the rest of the week, failing to attract even one decent short-squeeze rally the