Monday, August 16, 2010

Click here for the latest dispatch from Auerbach Grayson, No Free Lunch on Wall Street.  "This is not our first rodeo," writes Grayson global technical strategist Richard Ross, "and we have no intention of letting a classic low volume, thin market, late summer squall on the heels of the best month (July) in a year, throw us from our Bullish stance. Nothing has changed from a week ago and today we reiterate many of the same emerging, frontier and developed market themes which we have espoused for months in markets both up and down."

Nothing tricky here, analytically speaking. We'll use the obvious pattern shown in the chart in order to stipulate that September Silver must close above the 18.485 Hidden Pivot midpoint before we assume buyers are back in control. At that point, the futures would become an odds-on bet to continue over the very short-term to at least 19.170, the midpoint's 'D' sibling.

I won't bore you with the details, but technically speaking, last week's slide was impulsively bearish only on the intraday charts, not on the daily. (Please note: The decline on the DJIA's chart WAS bearishly impulsive.)  My gut feeling is that the futures will need to head-fake above Friday's 1089.00 peak before they plunge in earnest.  If not, a nearly 14-point fall awaits this morning, since that's what it would take to reach the midpoint support of the pattern shown.

Last week's bullish finishing stroke brought into focus a minor Hidden Pivot target at 1229.10 that we should use as a minimum upside objective for the near term.  That may seem like a conservative goal because it lies just $12 above Friday's settlement price, but it would have decisively bullish implications, since the target is above heavy supply created over a two-week period in early July. The futures are almost certain to push above the supply zone this week, but the earlier in the week they do so, the more bullish the implications will be going forward. ______ UPDATE (10:10 a.m. EDT):  The prediction panned out precisely, December Gold having surged this morning to a so-far high at 1229.50. The pullback has been a relatively shallow $5, and if that's all bulls need to take another leg up, we should infer that the next target above, 1244.20, will be achieved within days.

Even considering last week's selloff, bulls would seem to hold a very small edge at the moment, since they slightly bested bears in the "duel" evident in the 240-minute chart. Notice that the rally to 10720 on August 9 exceeded one internal and one important look-to-the-left external peak. It was followed by a decline that exceeded two external lows, and although it's a close call as to which feat was more impressive, I'll give a slight edge to bulls.  That doesn't mean we should expect the Dow to romp to new highs -- only that we should be prepared for a possible head-fake into no-man's land before the blue chip average dives anew.

Whatever we might expect from the latest Hindenburg Omen, it is probably too close to Labor Day for anything exciting to happen on Wall Street. Only second- and third-stringers will be working between now and the holiday, and the decision-makers, ensconced for the duration in their Hamptons digs, probably won't even be taking phone calls.

Chuck Cohen sees numerous signs that gold shares are (finally!) about to break out.  Click here to access his 12-page report.

The Hindenburg Omen is once again predicting a stock market crash, and we don’t know whether to ignore it and relax because (even) the Wall Street Journal has picked up on it this time, or to instead batten the hatches because sometimes even lousy indicators can be right. Over time, the indicator, invented by a blind mathematician named Jim Miekka, has compiled an unimpressive track record. While virtually every crash since 1987 has indeed been signaled by the Omen, there have been so many false signals that the indicator’s overall accuracy has been a dismal 25 percent.  Now, according to Miekka, the Omen is signaling a crash in September, having registered two key statistical events. For one, NYSE highs and lows both exceeded 2.5%; and for two, a rising 10-week moving average for the NYSE diverged relative to a negative McClellan Oscillator. The Journal had no trouble rounding up the usual skeptics to comment on the voodoo aspects of an indicator that takes its name from the fatal and still-unexplained 1937 explosion of a German passenger airship docked at Lakehurst (NJ) Naval Air Station. Thirty-six people died, including 35 people of the 97 people who were on board, and the cause of the fire was never determined. “We always love good conspiracy theories,” market strategist Joseph Battipaglia told the Journal. “I for one dismiss all these things because they usually erupt most numerously during bear markets.”  Well, at least Battipaglia seems to be acknowledging that stocks are in a bear market. Many in his and the Wall Street Journal’s line of business – i.e., telling the public what it wants to hear about the economy -- have yet to accept that all of those “green shoots” that supposedly were springing up a little more than a year ago were just hallucinations. For the hard-core optimists, the stock market’s weakness

With one of the most impressive "stories" driving it of any publicly traded stock, Apple is still trading exactly where it was in April. Do we infer from this market bellwether's slack performance that the broad averages have also been in a churn? I think so, and we should infer that even the very best companies in America are somewhat limited by the weight of a Depression-bound economy that has hit nearly every sector.