June 2010

Yesterday's thrust refreshed the bull trend on the intraday charts, exceeding the external, "look-to-the-left"  peak shown with a robust new impulse leg. The small pattern at the right-hand edge of the chart can be used for targeting and leveraging the next push, but keep in mind that the larger pattern begun from the May 6 low implies critical resistance at 19.200. _______ UPDATE (2:32 p.m. EDT):  The July contrtact has been as high as 19.275 today, having effortlessly impaled the 19.200 resistance in a single bound.  This exuberant price action will shorten the odds of a further push to at least 20.45, the next important hidden resistance, over the next 4-7 days.  

A Hidden Pivot target at 1127.25 is equivalent to the one at 10572 given in today's DJIA tout.  The midpoint resistance at 1113.75 has already been exceeded, although not on a closing basis, so we won't assume yet that the rally is a done deal. Night owls can try getting long in the conventional way, at point 'X', if the pattern shown in the chart plays out in normal fashion, more or less as shown.

I mentioned a 10572 rally target for the Dow in today's commentary; the chart show its provenance.  The midpoint resistance lies at 10445, just a few points above yesterday's high, so we might expect quite a bunny-hop if it is taken out.  Will it be?  The suspense is killing me.

Like frightened little rabbits, shorts panicked once again late in the session, goosing the Dow 100 points in the final 30 minutes (see chart below). In the end, predictably, they wound up doing exactly what they had sought to avoid.  Don’t these guys understand that if they all hung together and chilled for a rare change, the broad averages would come cascading down like a tropical downpour, ending a selling drought that has persisted for more than a year. You’d think that the May 6 “clerical accident” might have emboldened at least some of the “Don’t Pass” bettors. Evidently not. The way things stood Thursday afternoon, the rabbits had only set themselves up for more punishment later in the day, since nothing short of Armageddon could cause DaBoyz to relinquish the choke-hold they had around the rabbits’ necks at the closing bell. A silly image, we know – a mustachioed, Simon Legree character with a bunny locked in his armpit, its little pink eyes bulging from their sockets. But in truth, those who have been betting against the market lately don’t deserve to be called bears. They don’t roar, they don’t rear up ferociously on their hinds when challenged -- they just nibble on lettuce and extrude little pellets when nervous. Fresh Pellets Friday morning could produce a fresh pile of pellets if there’s any good news on the tape to help DaBoyz maintain their short-squeeze choke-hold. The Dow closed at 10434, but according to our proprietary Hidden Pivot forecasting system, there’s 138 points of open space just above if bulls are in command at the bell.  That implies a run-up to at least 10582, which is the next place the rabbits could attempt to impede the rally without getting damaged too badly, at least not right away. But if

Some city and county employees and school districts are taking dramatic steps to try to solve their budget problems. The Sacramento County, Calif., sheriff's deputies union is using mobile billboards, mailers and radio and newspaper ads with vivid images and messages in a bid to avert more layoffs. The campaign includes a photo of a child with an adult's hand over its mouth and the words, "Your child could be at risk!" Another shows a masked man breaking through a door and asks, "Do you feel safe?" via Ads are latest weapon to scare off layoffs - USATODAY.com.

Our friend Erich Simon asked his scientist cousin in Germany what he thinks about the Gulf oil gusher.  Here is the cousin's interesting response: "The claim of several leakage sites has been around. The scientific method (and I can't deny my pedigree here) would be to say "show the data", which at the moment is unlikely to happen due to whatever degree of the incompetence <-> conspiracy continuum. Seriously, this is a very difficult situation. "Fractured seabed: wouldn't want to nuke the hole closed then..... "Peak Oil debunking? I know there are discussions between Peak Oil people vs. abiotic origin of and hence plentiful supply with oil. Fossil origin of oil means finite supply. Abiotic origin sounds nice, but if true will require extremely deep drilling = difficult = expensive = unclear whether it can supply oil at the economically required rate. Regardless of which side one takes in a fossil vs. abiotic origin debate, slowing growth or even decline of oil production by whatever mechanism (fossil oil running out, abiotic reserves too difficult to reach by drilling) has to be called Peak Oil. The debates are on whether the globe is at that tipping point. Personally I don't care too much about cheap talk of those combattants and them scoring discussion victories, but I just wonder whether we can afford to ignore the possibility of a bad outcome (i.e. Peak Oil in the strong sense) and not prepare for the coming crisi(e)s?   Even if there is an abiotic origin of oil, does one (for the time being) want to have the carbon dioxide in the atmosphere? I think again an argument pushing for conservationism + preparedness. "Where the US government stands on these questions is obvious: with a military presence in the Middle East, so guess what they are

I've given Gold a conditional green light for Thursday, put pivoteers should check out the chart accompanying today's tout, since, from a Hidden Pivot standpoint, gold's readiness for another leg up was a close call. Concerning the broad averages, my rally targets for the E-Mini S&P have taken quite a pounding in the last few days, and it  remains to be seen whether Kudlow's lust for shares has been satiated.

The rally from Monday's low is impulsive enough, but there's a question as to whether the pullback from yesterday's highs was sufficient to recharge August Gold for another leg up.  The futures needed to have pulled back to 1228.13, but they turned higher from 1228.30.  We'll give the bull the benefit of the doubt, but traders should not take the implied target at 1250.30 for granted. Its sibling midpoint lies at 1239.30, so anything above that would be most encouraging. _______ UPDATE (12:23 p.m. EDT):  Gold rallied $20 overnight, topping at exactly 1250.30 this morning.  A shallow pullback during the last two hours appears to have rejuvenated buyers for a push to the next important threshold, 1272.60.

The 78.08 rally target flagged here two days ago caught yesterday's top within a nickel.  I hadn't explicitly suggested getting short there, but at least one chat room regular did. He felt he'd covered prematurely -- the futures are currently trading down 97 cents from the high, but he exited much earlier  -- so let me repeat the advice I gave him in the chat room:  "An easy way to know when to cover is to simply use the impulse-leg rule. Drop down to July Crude's one-minute chart and you'll see that we would become buyers if it shot up above 77.83, an external peak. That's really where a rally would become threatening to a scalper/short-term trader who is short."  Indeed, the best place to cover a short position will often be at the price where you might have gotten long if you'd held no position at all.