Tuesday, July 20, 2010

Today's ES tout envisions lower prices, but be prepared to see a slugfest of sorts early in the session between the enfeebled bulls and bears who have made this summer so boring. The broad averages are trading almost exactly where they were two months ago, notwithstanding some gratuitous histrionics over that time.  It would take a Dow rally of about 700 points to turn the intermediate-term picture bullish, but until that happens bears will retain the upper hand.

Apple not only shattered the trendline support we've been monitoring, it did so with a gap-down opening that left no doubts about sellers' seriousness.  We should now expect to see a move back up to the support, which comes in today around 247.63, rising to around 248.03 by day's end. It's hard to imagine Apple's phenomenal marketing success petering out as long as Jobs is in charge, but perhaps the charts are predicting a creative dry spell?  Expectations were pumped pretty high, so it wouldn't take much of a fall-off in profits to trigger a nasty readjustment. If so, a Hidden Pivot at 227.09 will be a logical correction target, subject to dithering near 244.99, a Hidden Pivot midpoint, in the days ahead. Alternatively, it would take a thrust this week to at least 258.38 to reverse yesterday's damage._______ UPDATE (2:13 p.m EDT): DaBoyz have tipped their hand, brazenly demonstrating to anyone who cares that any story-driven selling in this stock is just a shakedown to steal shares at fire-sale prices from widows and pensioners. Apple quickly reversed this morning after a manipulated gap-down opening, and then the stock made suet of trendline resistance with a so-far $10 rally off the lows.  It's no surprise that AAPL has attracted Wall Street's criminal element, since it is one of the very few publically held American companies with a credible success story to hype.

Yesterday's flim-flam price action created a pattern that projects to as low as 1033.25 over the near-term, subject to a bounce from a midpoint support at 1052.00. This assumes another leg down as robust as the impulsive decline recorded on Friday, but I doubt sellers will be feeling so feisty after yesterday's exhausting bout of mud-wrestling. My outlook is bearish nonetheless, but look for more hysterics and conniptions first before the futures turn lower, perhaps later in the day. ______ UPDATE (2:05 p.m. EDT): Bears are getting deservedly reamed today after failing to do much harm to the 1052.00 support identified above.  The actual low was 1050.75, and sellers seem to have abandoned their mission after the futures turned higher from just below the Hidden Pivot support.  The futures have traded as high as 1075.00, but they'll need to surpass a look-to-the-left peak at 1076.00 from Friday to put bears out of commission for perhaps another day or two.

A fall to at least 1140.10 seems unavoidable, considering the weight and precision of the corrective pattern (see inset). It's too pretty to not pan out, really, even though we should expect a bounce from above (or perhaps just below) the 1168.00 low recorded on May 20, as well as from the 1155.00 target of a lesser down-pattern. We'd want to judge any such rallies strictly, since, at that point, the burden of proof for the intermediate-term outlook will lie with the bulls. _______ UPDATE (1:10 p.m. EDT): Gold has paid scant attention to my forecast, diving nearly exactly to the midpoint of a pattern I'd overlooked (5-minute, A=1194.70  at 4:50 a.m. on July 19), then trampolining $18 on the recovery to a so-far intraday high of 1193.70. We shouldn't be too impressed, however, since the high fell a dollar shy of yesterday's peak -- not to mention, $4.20 shy of a peak at 1197.80 "along the wall" of last Friday's steep decline.  Bulls will need to clear that hurdle before we take encouragement, let alone get excited. Still, it's nice to see bears on the run for a change.

The weather could become Topic A around here if the markets get any more boring than they have been. Yesterday’s snooze fest was impressive in one respect, though: It demonstrated that the Dow can fall 265 points, as it did on Friday, and wake up Monday morning with no trace of a hangover.  Did stocks perhaps fall because cyclical forces had ordained it?  We’ll never know.  But whatever may have been troubling traders as the week drew to a close, it was not a factor in Monday’s gratuitous waft higher. The Industrial Average closed with a gain of 56 points, showing no particular strength or enthusiasm, only a mild propensity to take the path of least resistance.  The hum-drum price action is corroborated by some widely followed technical indicators, including the McClellan Oscillator. We’ll be hearing more about the McClellan later this week from our friend and colleague Larry Amernick, who thinks that tedium will be with us for yet a while longer. From a McClellan standpoint, he says, traders can only get in trouble by taking a plunge right now. Continuing a pattern that has persisted for some weeks, yesterday’s unimpressive strength in the broad averages was matched by unimpressive weakness in Gold futures. The Comex August contract was  down nearly $12 at the lows, trading for 1176.90.  This is the lowest the futures have been since May, but it stopped shy of breaching a major supportive low at 1168.00 recorded on May 21.  Actually, we have been anticipating somewhat worse by way of a Hidden Pivot target at 1140.10.  Bulls will have a chance to take a stand at 1155.00, the corrective target of a lesser pattern and our minimum downside objective for the near term. But if the support fails, you can infer that more weakness to