Thursday, July 29, 2010

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.

The Gold Bugs Index looks vulnerable to a nearly 5% drop, assuming it falls to a Hidden Pivot support at 414.00 that comes from the daily chart. This target is tied to a point 'A' high at 471.18 recorded on July 13, but if HUI should overshoot the target by more than a point or two, the implication would be new jeopardy to as low as 383.96. I doubt it will be that bad, but in any case it will take a rally to at least 459.98 over the next 3-5 days to turn the hourly chart bullish.

The futures looked to have been saved by the bell, albeit in a very minor way, when a selloff to 1097.00 got timed out. That Hidden Pivot target is still valid, but it is useless for trading purposes because it coincides with Monday's presumably supportive lows. Sellers should have no trouble breaching the support early in the session -- or perhaps even overnight Wednesday -- if the hinted weakness noted in today's commentary starts to snowball. That would refresh the bearish impulse on the hourly chart, giving buyers something to chomp their dentures on when stocks open on Friday.

Unless the futures pop above a look-to-the-left peak at 1168.40 today, they should be presumed on-track to achieve the 1140.10 Hidden Pivot we've been using as a correction target. As of Wednesday's regular-session close, however, a weak bounce from an 1155.00 pivot was seemingly limited by an HP resistance at 1166.50.  Please note that if and when 1140.10 is reached, it can be bottom-fished with as tight a stop-loss as you can handle. A camouflage entry is preferred, however, and Pivoteers should start looking for such an opportunity on the 3-minute chart when the August contract reaches 1142.50 on the way down. _______ UPDATE (10:05 aa.m. EDT):  This morning's rally was rubbish. The fact that it achieved the bullish benchmark we'd set only means that we set the bar too low.  This is not an obscure technical point, but rather something that can be confirmed by technician and non-technician alike simply by looking at the 60-minute chart.

We were looking for a 350-point rally as the week began, but at the rate stocks have been rising it could be Labor Day before the Dow Industrials hit our 10757 target. In the meantime, dirges like yesterday’s could have satisfied neither bulls nor bears, since it took the blue chip average six tedious hours to work its way just 40 points lower. (Get a week’s worth of free forecasts, as well as access to the 24/7 chat room, by clicking here.)  Ordinarily we would chalk this up as another day of consolidation within an uptrend that at times seems unstoppable. However, in this case there is a so-far minor concern that bears close watching, since it could be a harbinger of trouble immediately ahead. Specifically, the Indoos have pulled back from Tuesday’s fleeting peak without having exceeded the 10594 high recorded on June 21. You can see this in the chart below, and it suggests that buyers may have run out of steam earlier this week. Indeed, if they were feeling feisty, they would have demonstrated it by going the extra few inches to conquer the June 21 peak. Instead, they stopped 16 points shy of it before turning tail and heading lower. In the parlance of the Hidden Pivot Method that we use to forecast stock and commmodity prices, this is an impulse-leg failure. According to the simple rules of this method, healthy rallies must continually refresh the bull trend by “impulsing” above two prior peaks with each new, cyclical thrust. Of course, the Dow could come roaring back this morning and surpass the two required peaks with room to spare. But it should have done this yesterday, on the first try and without a 40-point pullback, to be considered healthy and robust.  Not that we think the