Tuesday, June 29, 2010

The narrow failure of yesterday's rally to push above the 502.15 peak from May 12 was a cautionary sign, since bulls with designs on impressive new highs would never have been so timid.  However, they'll have a chance to turn things around if the pullback hits 483.71 (see inset), a minor midpoint support. If it's taken out, though, we could expect the selling to continue to at least 476.85.  These targets will remain valid as long as 490.58 is not exceeded to the upside first. Either can be bottom-fished with a stop-loss as tight as 5-6 cents.  ______ UPDATE:  It was all over for bulls on the opening bar, since HUI gapped down to 475.68 in the first minutes of the session.  This refreshed the bear trend as well, creating a minor impulse leg that projects most immediately to 467.31.  Bottom-fishers would have been stopped out for a small loss.

Yesterday's bull trap did barely any damage to the hourly chart, let alone the daily. Still, there is short-term downside potential to 18.420 if yesterday's low, 18.625, is breached by more than a tick or two.  You can bottom-fish the lower number with a stop-loss as tight as three ticks. If bulls turn things around with more corrective action, a print at 18.880 is where they'd begin to look credible.

The intraday charts have nothing of interest to say at the moment -- other, perhaps, than to traders keen on scalping the one-minute bars. Bulls would mount a credible threat once above 1104.00, a midpoint Hidden Pivot resistance, but anything less should be regarded as mere noise.  It would only take a push up to 1084.25, however, to create a presumably doomed impulse leg on the hourly chart. _______ UPDATE (2:44 a.m. EDT): The futures have broken a key support at 1062.75 that was noted in "Today's Action."  This is most unusual, since the Mini-indexes rarely sell off and night, and even when they do, the selling almost never breaches visually obvious support.  The weakness projects to 1046.75, with a midpoint support -- now resistance -- at 1063.25 (5-minute chart, A=1095.75 on June 23; B=1062.75; and C=1079.75; see inset). Shorts can use a conventional point 'X' entry off any ABC pattern on the 5-minute chart, but the more conservative play would be to bottom-fish at the 1046.75 target with a 1.00 point stop-loss.  Please note that, with weakness in plain view of all, DaBoyz are going to give it everything they've got to create a phony rally for purposes of distributing stock. So that you are not caught unawares, I'd suggest using an impulse leg on the 3-minute chart to warn if a head-fake is imminent. ______ UPDATE (10:35 a.m. EDT):  The Hidden Pivot at 1046.75 gave us a comfortably tradable bounce, but we scratched the position (after taking a partial profit) when ES collapsed anew upon release of alarming consumer confidence numbers.  Considering the Dow is down 280 points, we didn't do too terribly badly on a bull play. Consumer confidence came in at 52.9 versus an expected 62.7 -- a margin of error so large that we can only infer that it was economists alone whose expectations were being referenced. Whoever's stupid expectations they were, you can expect the

We hold two August 98 puts for 1.06 and four July 96 puts for 0.70.  Continue to offer four July 90 puts short for 1.40, good-till-canceled. The order is a longshot bet at the moment, but it could fill in a trice if a long squeeze develops before or immediately after the July 4 holiday. A dip below 101.29 in the early going this morning would be an encouraging sign.

Yesterday's downdraft was undeniably nasty, but it would take a print below 1216.20 today to make it officially worrisome. That's where the selloff would become bearishly impulsive on the daily chart, as shown in the inset. Keep in mind, therefore, that a breach of low #1, followed by a rally and subsequent breach of low#2, would imply short-term corrective action rather than the start of an intermediate-term downtrend. Most immediately, the futures will have a chance to turn from 1233.50, a midpoint pivot, or perhaps from its 'd' sibling at 1225.30.  They could also put bulls instantly on the offensive with an upthrust this morning exceeding 1244.40, a look-to-the-left peak from Monday recorded on the way down on the 1-minute chart.

Today and tomorrow, we will present two radical proposals for dealing with debt. The first, argued below by Ben Rositas, a frequent contributor to the Rick’s Picks forum, would redistribute America’s official store of gold bullion to all who are owed on behalf of all who owe.  The second, from another forum regular, Rich Cash, would wipe the slate clean via a return to Biblical Jubilee or something like it. Although we’ll concede that neither idea is even remotely feasible politically, consider the alternative: a debt deflation that locks the economy into a grinding Depression for the next twenty years. One thing is absolutely certain: Given that Americans are collectively on the hook for hundreds of trillions of dollars worth of obligations of all kinds, those who are owed are never going to be paid off in hard dollars anyway. And we are not talking about just banks and mortgage lenders who will ultimately have to settle for pennies on the dollar, but about the scores of millions of Americans who will find the till empty when it comes time to draw on Social Security, Medicare and all the other Ponzi schemes run by Big Government. Let’s Screw Ourselves Under the circumstances, why not simply screw ourselves now, deliberately and with constructive purpose, so that we can enjoy the benefits of being economically unencumbered as Americans have not been since before the creation of the IRS and the Federal Reserve nearly a century ago?  This might even return the banks to their original role of taking deposits and lending them to worthy businesses.  Indeed, if the five biggest banks in America were to go out of business tomorrow, we would probably get along beautifully without them, much as we would probably thrive personally and economically without the egregiously misguided efforts