Monday, September 27, 2010

We've been focused on an important target at 22.505.  That's a Hidden Pivot, and I have suggested using it as a minimum upside target. However, there is another significant Hidden Pivot at 21.635 with potential stopping power, and so I'm going to suggest extreme caution if and when the futures get there (which could easily be today or tomorrow, at the rate the rally has been going).  The provenance of  this target is shown in the accompanying chart, and you don't need to be a Pivoteer to understand why it deserves to be closely watched.  Scalpers can attempt shorting with a stop-loss as tight as 10 cents.  Alternatively, if the futures fall, the first hint of trouble on the hourly chart would come on a print today below 21.120, a low made on September 24.  _______ UPDATE (10:23 a.m. EDT):  Having topped this morning a penny above the 21.635 target, the futures have since fallen 25 cents. Cover half of any short position now and use a fixed stop-loss at 21.515 for the rest. That's where the 3-minute chart would turn bullish again. My minimum downside target for the very near term is 21.310, but at that point you should check back for further instructions, since we may want to implement a stop-loss based on the creation of an impulse leg on the lesser charts.  _______ FURTHER UPDATE (3:48 p.m. EDT):  Based on two contracts, we're showing a gain on paper so far today of about $2000.  Continue to use a 21.515 stop-loss for the contract(s) that remain(s), o-c-o with a buy order at 21.310.

We're using an important Hidden Pivot at 1340.00 as a minimum upside objective for the near term (i.e., a week or so).  Other lesser targets to be encountered along the way and which may show some stopping power useful to scalp-traders include 1313.50 (60m, A=1272 on 9/21) ); and/or 1314.90 (60m, A=1242.30 on 9/13).

The Mother of All Bear Rallies wafted on Friday to within easy distance of re-igniting a bull trend that had seemed unstoppable until last spring. Back then, buyers who had driven the broad averages higher for fourteen months at an unsustainable, 45-degree pitch went limp, sending stocks into a vexatious roller-coaster ride of thousand-point ups and downs that have defied easy categorization as either consolidation or distribution. However, the bulls will have a chance to take charge unambiguously on Monday when shares begin to trade, since it will take a mere 60-point rally, to 10921, to turn the Dow’s daily chart bullish. We should note, however, that that wouldn’t quite clinch the bullish case for the longer-term, since a thousand-point rally to at least 11868 is needed. Last week’s dramatic liftoff was brought on by the usual suspects, including:  1) the virtual absence of sellers in a market that has been driven 99% by computer-trading and institutional prop desks; 2) a sufficient quantity of aggressively spun but ultimately meaningless “good” news to drive short-squeeze buying through key resistance; 3) a helping hand from opportunistic buying of U.S. index-futures in illiquid, overnight markets; and 4) a mood-driven window of opportunity for the mountebanks, self-promoters and insipid droolers of the talking-head world to interpret whatever news hits the tape as bullish.  For example, there was the marquee-named Quincy Krosby. She is the chief market strategist at Prudential Financial, and her cue was an item on the tape that said U.S. companies were spending more, according to the Wall Street Journal, “at a time when the global economy looks to be on the rise.”  No matter that the rising appearance of things was as fleeting as dew on cactus, or that the supposed uptick in corporate spending apparently involved just a handful of high-tech firms. Such details were easily overlooked in a

At Friday's close the futures were flirting with the 76.47 midpoint of a bullish price pattern that points as high 79.36 over the near term. Consider the target an odds-on bet if the November contract closes above that Hidden Pivot for two consecutive days.

The futures topped last week a single tick beneath an important rally target at 133^23 given here earlier this month. Just one more tick would have implied the move is quite powerful, since it would have exceeded a visually obscure chunk of supply deposited September 2 on the way down. However, the rally that occurred will suffice to turn the daily chart bullish for the first time since mid-August, since it exceeded the requisite two prior peaks (one of them internal, the other external).  Now, ideally, we should see a 1^03-point "booster" rally from anywhere north of 131^00 to signal the next leg up. It could eventually go as high as 136^00.  ______ UPDATE (2:11 p.m. EDT): The predicted booster rally has come this morning off a 131^21 low, triggering a "buy" signal at 132^24.  Critical resistance lies at 133^27, the Hidden Pivot midpoint of the pattern, but if the futures can close above that number for two straight days, I'd infer they're on their way up to 136^00.