Monday, October 18, 2010

After feinting lower on the opening Friday, DXY trampolined powerfully, getting a running start at the first of two resistance peaks it will need to surpass to kick off a decent technical rally.  The accompanying chart shows the peaks in the perspective of the daily chart, and the rally past them would need to be unpaused once the Dollar Index crosses the "starting line" represented by the lower of the two.  However, if the rally dies somewhere between the peaks, then pulls back for a successful surge past the second, that would diminish the implied strength and probable longevity of the bull cycle (assuming it goes far enough to qualify as such). It does not bode well for bulls that the most recent ABCD downtrend achieved the 76.15 target I'd flagged with a tick to spare.  That's because strong bull trends, even incipient ones, typically produce pullback abc's that go no further than their c-d midpoints.

The extremely bullish, $315 target that I touted here five weeks ago, when the stock was trading in the low $260s, implied a 20% rally, but I didn't expect it to unfold with such speed.  Goosed by a runaway Google on Friday, Apple's rally has now gone parabolic. However, we can afford to sit tight and wait for the stock to return to earth, since our butterfly spread exposes us to a maximum risk of just $40 (versus a potential gain of as much as $2000).  For now, do nothing further.  We are long the November 300-310-320 'fly twice, and the maximum payoff would come if AAPL is trading around 310 when the November options expire.

The futures are off the equivalent of 60 Dow points late Sunday night, but the selling so far is well within Friday's range and looks contrived to shake down widows and orphans.   A midpoint Hidden Pivot support at 1167.25 has contained the selling so far, but if it gives way, that would open a path to as low as 1159.00, a hidden support that you could bottom-fish with a stop-loss as tight as three ticks. The trade will likely work best for night owls, though, since too much noodling around on the C-D side of the pattern is apt to queer the "Hidden Pivot effect." ________ UPDATE (10:25 .m. EDT):  Our trade never triggered, since Da Sleazeballs could push the futures no lower than 1164.75.  This telling weakness in the faked weakness set up a a moderate short-squeeze rally overnight.  So far, it has pushed the December contract as high this morning as 1178.25, but some back-pressure will need to build up before this hoax can vault the three peaks near 1180.00 that were recorded last week.

It's late Sunday night, and the futures have bottomed precisely on a 23.715 Hidden Pivot support equivalent to a target given this evening for December Gold. However, Silver's bounce looks anemic, and I don't expect the low to hold.  In any event, bulls would needs to push the futures above 23.950 to turn the (very) lesser charts bullish; otherwise, the December contract could grope its way down to as low as 22.945 -- last week's bottom -- in search of structural support. _______ UPDATE (10:12 a.m. EDT):  The Hidden Pivot support at 23.715 survived the night, giving way to a 60-cent rally. Now, it'll take a print at 24.550 to run it up the bad guys' ol' wazoo.

It's Sunday night, around 10:34 p.m. EDT, and sellers are attempting to drive the futures down to a correction target at 1353.30. That's a Hidden Pivot support, and you can try bottom-fishing there with a 1352.80 stop-loss. If the stop is hit, consider it a warning of more weakness over the near term -- presumably to at least 1349.00, a Fibonacci-based support from the hourly chart.  Looking at a somewhat bigger picture, a 1415.40 rally target given here earlier will remain valid unless 1325.60 is exceeded to the downside. _______ UPDATE (10:29 a.m. EDT): My 1353.30 target caught the low of a so-far $18 bounce within a dime, so even if you used a stop-loss as tight a two ticks, you got on board safely.  If you initiated the trade with a multiple of four contacts, keep 25% of the original position for a potential home-run.  Single-contract longs should use a 1362.10 stop-loss for now, o-c-o with a 1380.00 objective, since a print at the former is where a bearish impulse leg would be signaled on the 3-minute chart.  Officially, I'll track a two-contract long for your further guidance, with one of the contracts stopped as above, o-c-o.

(Are stocks and Treasury bonds w-a-a-y too revved-up over the prospect of more quantitative easing?  Our good friend Doug B. thinks so, and he is predicting that it’s all about to end badly for the bulls. Americans are about to experience a collapse in the standard of living, says Doug, and there is nothing we can do about it. The good news is that the pain and sacrifice that lie ahead will allow us to rebuild a balance sheet that has left the nation asphyxiated by debt.  A financial advisor based in Boulder, Colorado, Doug is a disciple of the legendary Bob Farrell and an occasional contributor to Rick’s Picks. He is an outside-of-the-box thinker who has gotten the big trends right over the decade we have known him. In the essay below, he builds his argument one brick at a time with “gozinta” and “gozouta” -- sophisticated accounting terms representing the generic sum of all inputs into an entity and the generic sum of all outputs from that same entity.  RA)  I have two long held and very strong opinions -- one about the stock market and the other about the Treasury bond market. I believe that, before the secular bear market in stocks that began in 2000 runs its course, we will be lucky if we do not achieve lower valuation levels than were typical of previous secular bear market lows. That implies a 6% dividend yield and a P/E multiple of eight on the S&P 500. (And I mean the index as a whole -- more on that later.)  In addition, I believe that the Great Bull Market in bonds, which began in 1981, will end in parabolic fashion. The consensus will believe that inflation is off the table for at least a generation and deflation is