Monday, September 13, 2010

The futures are within easy distance of generating some potent bullish impulse legs on the larger intraday charts, since it would take just a 22-point rally on top of Sunday night's wilding spree to knock off three -- count 'em, t-h-r-e-e -- external peaks.  If this were to happen today, bears should accept the possibility that there may be no relief in sight for at least a month.

All of last week's feeble thrusting did not succeed in pushing the Indoos past August 17's 10480 high, so let's not get too excited if it finally happens today. Although that would create a bullish impulse leg on the daily chart, it would not dispel the doubts that seem to be weighing on the blue chip average. A pullback from slightly above 10480 would offer a short-term buying opportunity nonetheless, so traders should look for camouflage in such circumstances.  The accompany chart shows one promising way this could unfold. _______ UPDATE (12:28 p.m. EDT): The opening-bar short-squeeze was so hysterical that we didn't have a chance to get long on such subtleties as I have described above. Detumescence off the morning's so-far high at 10567 has been swift and punitively steep for anyone who bought the opening.

The futures are taking their sweet old time to develop thrust, but as long as they don't correct beneath 19.505, a low recorded on September 3, bulls will hold the edge. Major rally targets at 21.630 and 22.505 given here earlier remain valid, but we should use a lesser Hidden Pivot at 20.710 as a minimum upside projection for Monday/Tuesday.

Gold looked to be on a tortuous path down to 1241.70 on Friday, or perhaps to 1230.40 if any lower. This is begrudging corrective action, is all, but once it ends, the next thrust will have the potential to reach $1300. For now, traders can bottom-fish either of those Hidden Pivot supports with a stop-loss as tight as four ticks. Alternatively, bulls would need to push the futures to at least 1255.00 today to send bears fleeing. ______ UPDATE (11:12 a.m. EDT):  The little s.o.b. turned from a low at 1242.30, cheating used out of the bullish joy ride we'd anticipated. For your information, the way to have caught the ride anyway, even if the futures "saw" our bid and took evasive maneuvers, is simply to have looked for the first camouflaged impulse leg before or after the downside target was closely approached. In this instance, using the three-minute chart, the point 'x' entry occurred at 1246.70, about an hour and 35 minutes after the not-quite-low-enough bottom occurred.  The point 'B' high of the pattern, 1247.30, was beautifully nondescript.

Dick Morris thinks the pundits are underestimating the odds of a Republican landslide in November.  Although most are predicting a GOP pick-up of 40-50 seats in the House and perhaps 8-10 seats in the Senate, the astute Morris, who was Bill Clinton’s closest political advisor, thinks a blowout is possible, with Republican gains of as many as 100 seats in the House and 14 in the Senate.  However, if Morris’s forecast proves correct, we’d suggest that conservative voters not get their hopes too high for a return of good times, since, arguably, the problems besetting the economy are so profound as to lie beyond political remedy. We don’t mean to suggest that those problems are insoluble – only that no politician would be able to muster the votes necessary to do what needs to be done. For starters, the government would have to let the big banks fail, since they are eventually going to fail anyway. However, even politicians who understand this wouldn’t dare appear to countenance it.  The only Congressman we can think of with the guts to push for the “nuclear option” is Rep. Ron Paul.  Mr. Paul is also one of very few office holders who understands economics well enough to explain with perfect clarity why removing the banks’ supposed safety net is the only solution that will work.  By allowing derivatives markets that have been brain-dead for years to clear, the “anti-bailout” would give the economy a fresh start, albeit one providing a significantly lower standard of living for most Americans. It would be a very tough sell, for sure, and no matter how compelling Rep. Paul’s argument, he’d be bucking a status quo that clings more and more desperately to the hope that the markets will return to health by themselves. Under this scenario, the more

Prayerful shorts should check out today's tout for the E-Mini S&Ps, since it raises the prospect of a painful autumn. Indeed, with relatively small push, buyers could put bears on the ropes for...weeks, if not longer.