Monday, November 29, 2010

We set modest bullish benchmarks for last week that the futures failed to achieve, implying they are in no great hurry to ascend to the 1429.30 target given here earlier.  It will remain valid nonetheless if 1331.10 has not been exceeded to the downside, but we should require a two-day close above the 1380.20 Hidden Pivot midpoint before we infer the futures are on their way. Camouflage artistes may find a long-entry opportunity Sunday night or Monday morning via an impulsive thrust just exceeding the two peaks shown in the chart.

The futures are entering their third week of tedious consolidation after having created a potent bullish impulse leg of daily-chart degree. If there seems to be a contradiction in this, there is:  It is like revving a dragster to the redline, only to have it smoke rubber for a full minute.  My hunch is that the futures will feint lower this week to resolve the standoff, then rally moderately into early December, though probably not till year's end. Most immediately, there are no juicy trading opportunities that I can discern, only the prospect of a herky-jerky move lower in the days ahead.  Night owls looking for a camouflage entry spot Sunday night will not have found much as of around 9 p.m., since price action thus far has added up to no more than meaningless noise. Nevertheless, the futures can be bottom-fished at 1180.25, stop 1178.75, provided the low is reached by no later than 1 .m. Eastern. ______ UPDATE (12:21 p.m.): The recommended trade was a non-starter, since the futures didn't make it down to 1180.25 until 5:30 a.m. The decline reversed Sunday night's overcooked short-squeeze, putting the futures on course to reach an 1175.75 downside target that was easily visible on the 5-minute chart (a=1200.50).  The fact that the target was overshot by 3.50 points in the opening hour suggests more weakness ahead, even though the futures are rallying at the moment.

The nearest rally resistance lies at 80.72, a Hidden Pivot whose provenance is shown in the accompanying chart.  Judging from the way DXY shredded its sibling midpoint at 79.35, it seems highly likely to be reached and should therefore serve as a minimum upside objective for the near term. If the target gives way easily, however, we should raise our sights to at least 81.80, a 'D' target realized by using the November 4 bottom as our point 'A'. _______ UPDATE (12:03 p.m. ET): DXY sold off for six hours after topping within 0.07 points of the 80.73 target. They then embarked, almost without pause, on a rally that has reached 81.14 so far. The clear implication is that DXY is bound now for a minimum 81.80.

With Ireland in the throes of an IMF-style bailout, we are being told not to worry about Portugal and Spain, since they are supposedly in significantly better shape. To be sure, Portugal is already living under stringent austerity measures, and Spain’s sovereign borrowing is nowhere near that of Ireland, let alone Greece, relative to GDP. So why are lenders imposing punitive interest rates on both? Simply because they smell blood. Not only are private lenders unwilling to help, they are actively betting against Spain and Portugal with credit default swaps that effectively raise the likelihood of a collapse when oddsmakers run out of room to lay off the action.  Opportunity moves to size, as traders like to say, and when they have something as large and juicy as a transnational bailout fund to target, it is all but guaranteed that they will. After all, there is a huge payoff if they stick with the bet until Europe breaks.  How do you think George Soros got so rich? Meanwhile, the very assurance from Brussels that Iberia can get by without a bailout probably ensures the opposite. Only thing is, when Spain and Portugal reach that point – meaning, when currently punitive borrowing rates become literally prohibitive – the jig will be up for Europe. It is one thing to pretend that Greece and Ireland’s boats have been floated, since they were initially alone in needing a rescue. But when Spain’s broad stern starts to slide into the deep, sucking Portugal into the vortex, the pretense that Europe’s nearly trillion dollar rescue fund can turn back the financial mob will evaporate entirely. For now, it doesn’t help perceptions that Spain and Portugal are themselves guarantors of the current rescue package, which is worth nearly one trillion dollars. That’s like having California be a

The Dollar Index is moving precisely as predicted Sunday night, so I'll suggest monitoring its movement closely relative to the two targets I've provided, especially if you're interested in rhythming Gold or Silver in order to trade them.  The term "rhythming" describes a technique used by slot machine players that involved simultaneous play on two machines. This was in the days of mechanical slots, before digital technology made it nearly impossible to gain an edge on slots without actually cheating.