July 2010

Coffee futures have had quite a summer, gaining 34% since early June.  They've spent most of July consolidating that gain and now bid fair to challenge a midpoint resistance at 178.25, basis the September contract.  This Hidden Pivot is crucial to the intermediate-term picture, since its decisive breach on a closing basis would portend more upside to as high as 200.70.

Apple's recent peak at 265.99 came close enough to the 266.57 midpoint pivot of the pattern shown that we can infer that its sibling 'D' target at 279.14 will be in play and likely to be achieved if and when the stock exceeds the midpoint.

A Hidden Pivot target not far below, at 17.185, seems unavoidable. It is analogous to the 1140.10 target proferred here earlier for August Gold. Like that target, it can be bottom-fished with a very tight stop-loss -- in this case as tight as six ticks. ______ UPDATE (3:13 p.m. EDT):  Bullion has rallied today, going against my expectations, and so I've updated today's gold tout by noting two peaks that the August contract will need to surpass to create a bullish impulse leg of daily-chart degree.  The corresponding peaks for Silver lie, respectively, at 18.280 and 18.535.  Keep in mind that, in order to signal a trend change with the kind of unambiguous power it will take to push Silver for once and for all above $20, the rally must not break into a b-c correction once it has surpassed the lower peak.

You have to drop down to the 10-minute chart to find the bullish impulse leg associated with yesterday's rally. It still projects to 1170.10, but the futures were unable to do any better than 1168.90 intraday despite the absence of structural resistance near the target.  Today the futures will need to touch 1175.10 to evince even a hint of genuine buying enthusiasm. _______ UPDATE (12:32 p.m. EDT):  I'll keep an open mind about this rally, but the key test that looms is quite clear in any case, since, in order to decisively end the correction from June's all-time highs, the futures will need to surpass -- without a b-c correction -- two peaks on the daily chart that lie, respectively, at 1203.90 (7/23) and 1218.80 (7/13).  Two bullish factors can be cited at this point: 1) the futures have turned from within just 0.60 cents of a legitimate Hidden Pivot support at 1155.00; and 2)  strong physical buying at lower levels -- this was mentioned in the chat room by a gold dealer -- seems to have repelled sellers.

Odds that stocks are about to dive shortened with Thursday's modest decline, but we should never count DaBoyz out when they are tasked with ginning up a short-squeeze on a Friday. Traders are likely to be more wary than usual, however, given yesterday's vicious bull trap thrust in the opening minutes of the session.

The futures were taking a second leg down to at least 1092.25 when the session ended. That number, a midpoint Hidden Pivot support, will work for night owls as a place to try bottom-fishing.  A three-tick stop-loss is appropriate, but if it's hit hard, a 'd' target at 1080.25 will become the new minimum downside objective. _______ UPDATE (3:19 p.m. EDT): The bounce from an overnight low of 1092.25 amounted to a barely tradable 3.75 points. ES then relapsed to a very short-squeezable pre-opening low at 1083.50. (The news backdrop was that Q2 GDP was even more anemic than had been expected.)   As of this moment, the squeeze has continued in the form of an artificial, Friday Special rally. This hoax has yet to create a bullish impulse leg even on the lowly 15-minute chart, but I wouldn't rule out the possiblity, since DaBoyz still have another 45 minutes to play on the nervous Nellies' fears.

( Rick’s Picks frequently runs guest commentaries expressing opinions that differ markedly from our own. Below, Mario Cavolo, an expatriate who lives in China, argues that there is no global, deflationary depression bearing down on us, but rather a muddle-along economy with strong spots as well as weak ones. We disagree and see a period of economic darkness more severe and widespread than any ever recorded.  That's because the world is unwinding a financial asset bubble with a notional value of nearly a quadrillion (i.e., $1,000,000,000,000,000) dollars. Considering the sum involved, there can be no easy or quick return to economic health. More logical is that a totally corrupt global financial system will have to be destroyed before we can rebuild the economy on honest trade. As things stand, the world’s financial-products-and-services balance sheet is at least ten times as large as the ledger for trade in real goods and services. Mario notes optimistically that Japan has muddled through its decades-long deflationary recession without experiencing social disintegration. Although this is true, we would argue that it is so only because Japan had the rest of the world – including an insatiable U.S. consumer – to keep its powerful export machinery humming as it traversed deflation's valley of death.  But who will bail out the U.S. and Europe as we continue to sink together? We could take on Mario’s arguments point by point here, but we’lll let that happen in the Rick’s Picks forum, which continues to attract an intelligent and articulate following.  RA) It is easy to continue feeling humbled and confused by the sentimental and fundamental dance of the world’s asset classes and regions, be they equities, currencies, commodities, or that shiny stuff; feel free to pick your basket of market sectors to analyze and track.  DaBoyz is a moniker here at

The E-Mini's stall on Tuesday just below the summer solstice peak became more apparent with yesterday's modest decline. If the downtrend lengthens just a little more today, we should be prepared for a pickup in selling momentum on Friday.

The rally has turned ferocious, shredding targets and creating new impulse legs on the daily chart with ease. A modest rally to above 3.280 will create yet another, adding weight to the prospect of more upside in the weeks to come. I've projected a minimum target of 3.5545 using an "inverse" pattern as shown. These patterns work some of the time, but I don't recommend initiating trades at their predicted swing points unless the target is corroborated by a stall precisely at the CD midpoint. In this case, that has not occurred.