The Dow looks to be in the throes of a 420-point plunge, even if sellers were unable to deliver the haymaker yesterday that would have put bulls down for the count. At the final bell, the drop amounted to only 144 points, although it would have been closer to 200 points at the day’s lows. If our prediction of a further 276-point fall over the very near-term pans out, pushing the blue chip average slightly below 10000, that would be just a very small downpayment on all of the plunging the Dow will still have to do to catch up with a U.S. and global economy that have begun to relapse into deep coma. Dow 5000, anybody? Whatever happens, it seems clear already that the highs » Read the full article
It’s explosive days like yesterday that serve to remind us of Bonds’ strong propensity to go against weakness in the broad averages. To the extent I am increasing the drum beat for the “sky-is-falling” argument, I am implicitly saying that a powerful upthrust awaits in this vehicle. More immediately, and considering the ease with which the 134^09 Hidden Pivot gave way, I’ll hang a 135^09 target out as a minimum upside objective for now — and 140^20 if it fails.. The provenance of the first number is shown in the accompanying chart, but there are any number of other bullish ABCs that I could have used. Anyway, we are not trying to short this vehicle so much as find explanations for the behavior of other markets that take their cues from it. Meanwhile, it cannot make anyone feel “safer” that so much of the world’s investment capital is pouring into one allegedly “safe” haven. As Marc Faber has said, people will want to cross the icy river where the greatest number of people are crossing it, but that’s hardly the way to ensure one’s safety.
This week’s consolidation has occurred entirely below an 83.03 peak recorded on July 23, so the potency of the larger, bullish pattern begun on August 6 is suspect. It projects to 84.30, but because the pattern itself is sausage-y, we should assume for starters that more consolidation is needed before much of anything happens for bulls.
I drum-rolled a 1040.25 downside target in the chat room yesterday, and it still looks like a no-brainer. A plunge to that number should be viewed as likely if and when the midpoint support with which it is associated, 1069.25, gives way. The so-far three-tick penetration of the support was not sufficient for us to have inferred that the jig was up yet for DaSleazeballs, who were hard at work near the close attempting to make a distribution opportunity out of a pathetic five-point rally.
The futures at least crept past the lower of two rally targets we’ve been using, 1236.70, and now presumably will take on the second at 1244.20. As noted here earlier, scale-out profit-taking is advised for swing traders still long, as well as the use of a “dynamic” trailing stop as described on this site’s educational page.
More downside over the near-term to at least 15.865 (see inset) looks very likely, so traders should position from the short side. The opportunity may be past by morning, but night owls can use an entry trigger on the lesser charts (i.e., 5-minute bar or less) to get aboard. I’ve highlighted the relevant ABC pattern, which appears at the rightmost edge of the chart. ______ UPDATE (9:23 a.m. EDT): Anyone who got short as advised made a pile of money overnight without much stress. The futures have plummeted and are currently down about 63 cents, having recorded a so-far low at 15.635 that exceeded our target by by 23 cents.
The failure of Tuesday’s rally to reach the modest, 1260.30 Hidden Pivot target we were using as a minimum upside objective is not exactly a sign of robust health. The target remains theoretically viable because the point ‘C’ low at 1232.00 with which it is associated is still intact. However, the hourly chart has swung bearishly impulsive as a result of the ratcheting, two-day sell-off from the recent high at 1255.60. Short-term downside potential is to the 1232.30 target shown. If this Hidden Pivot support is easily breached, however, it would suggest more sellers are waiting in the wings. Alternatively, the futures would need to surpass 1246.30 without having first touched the 1239.30 midpoint support (see inset) to turn the hourly chart short-term bullish. _______ UPDATE (October 27, 8:01 p.m. EDT): I expect the next leg down to reach the 1216.40 Hidden Pivot support shown. Alternatively, a print today at 1236.30 would give bulls a fighting chance. _______ UPDATE (October 29, 1:23 p.m.): 1202.10 is my new downside target — a Hidden Pivot support identified during this morning’s weekly tutorial session. _______ UPDATE: An 1125.00 target broached yesterday during my regular interview with Al Korelin should suffice to keep you out of trouble. I hadn’t imagined the futures would get halfway there overnight.
Apple’s gap yesterday through the 100.41 midpoint resistance (see inset) strongly implies that its D sibling at 105.64 will be reached. Although a pullback to the midpoint should be treated as a belated buying opportunity, I wouldn’t suggest chasing the stock higher. That said, the four labeled peaks are tailor-made for the Hidden Pivot trader who can employ the ‘camouflage’ technique for getting long. If you understand why, you should go for it! _______ UPDATE (8:13 p.m.): The broad averages pulled Apple back down to earth yesterday when the stock tried to go opposite weakness that surfaced around mid-session. This runs flatly counter to my speculative idea that AAPL might pull the broad averages higher. That’s still possible, since yesterday’s 104.11 peak fell 53 cents of a rally target that remains valid in theory. However, we’ll eschew speculation for now and simply watch to see whether the 102.44 Hidden Pivot support holds (see inset, a new chart). _______ UPDATE (October 23, 1:59 p.m.): Apple has rebounded sharply today, off a 102.90 correction low to a so-far high of 105.05 that’s 59 cents shy of our target. Most longs should have been exited by now. ______ UPDATE (October 27, 8:07 p.m.): Friday’s high at 105.49 came within 0.15 of the target flagged above. Bulls can continue to hold small long positions for a swing at the fences, but I’d suggest tying your shares to a stop-loss based on a downtrending impulse leg on the 15-minute chart. Currently, that would imply stopping yourself out if an uncorrected fall touches 104.52. _______ UPDATE (October 28, 8:44 p.m.): Still long? Be alert at 107.08, a Hidden Pivot target that looks all but certain to be reached but which could stop the rally cold. You should tighten your trailing stop there in any case. ______ UPDATE (October 29, 9:25 p.m.): The rally has shredded some challenging Hidden Pivots, but let’s see if it can bully its way past the 109.07 target shown. In any case, it is my minimum upside objective for the near term.