Friday, February 25, 2011

The hourly chart simplifies a possible speculative buying opportunity, since any chart of lesser degree leaves us with too many point 'A's to choose from.  If the pattern develops along the lines shown, consider bottom-fishing the midpoint support with a stop-loss no wider than four ticks.  Bulls will need to push the futures to a close above 33.728 to set the stage for more strength next week.  That's the midpoint resistance of the 60m pattern A=30.265 (Feb 16), B=34.330. _______ UPDATE (10:26 a.m. EST):  The pattern has played out so that there will indeed be a speclative buying opportunity if the futures fall to 32.190 (aka Point 'P') without having exceeded the overnight high, 33.125.

Structural resistance at 1426.30 still looms as the most important challenge for buyers over the near term.  In the meantime, here's a view of the monthly chart that we haven't seen before. It yields a rally target of 1512.30 for the April contract, but it also hints of a possible struggle to attain highs above that number.

The March contract has dispatched a midpoint resistance at 1.3735 with ease, implying that the rally will continue to its 'D' sibling, at least: 1.4046.  The target can be shorted with a stop-loss as tight as six ticks, but if you're planning on boarding for the ride north, I'd suggest looking for camouflage cover on the lesser intraday charts.

A midpoint resistance at 57.96 makes a logical rally target for today (see chart).  Let's try to leverage it by buying four March 57 puts, which should be trading for around 0.88 if the Cubes reach our price objective.  A stop-loss at 58.12 is advised, and if it's hit the options should not have lost more than a nickel or so of value.

Bears turned in an underwhelming performance yesterday,  letting bulls mop the floor with them after they'd succeeded briefly in pushing the Dow 120 points lower.  I found myself wondering aloud during yesterday's impromptu trading-room session whether only a black swan event could cause the selling to snowball.  Still, the impulse leg generated so far looks fairly impressive on the daily chart, and it may have even further to go, since there has not yet been a b-c correction to end it. (That would occur today on a print of 1311.00 or higher.)  Traders can try bottom-fishing at 1274.50, stop 1273.75 (!) provided the 1311.50 Point 'C' of the pattern has not been exceeded to the upside.  Buyers would put bears seriously on the ropes today if they can squeeze this vehicle above 1320.50.

[All hell broke loose in the Rick’s Picks forum yesterday after Mario Cavolo, an unapologetic optimist who tends to see the glass as three-quarters full, let fly with the rosiest pronouncements we’ve heard so far on a U.S. dollar that has been sinking in value for nearly ten years.  “So okay then,” wrote Mario. “We’ll devalue the dollar and a few years later, when U.S. assets are more and more attractively cheap, the money and investment and growth will start to flow back in.”  This was just too much for Robert Moore, an intrepid blogger and occasional guest essayist on this page. Mario’s entire post can be found by clicking here. Below is Robert’s response.  RA] And how exactly does a weakening currency result in more attractive domestic prices? Or, are you suggesting that as the currency weakens that it will mean stronger U.S. exports, and therefore greater domestic growth? if so, then how, exactly, will these miraculous exports be manufactured?  The cynic in me says that the U.S. will have to hit a very deep and rocky bottom before manufacturing and the ability to export the surplus ever returns to these shores. Our manufacturing infrastructure is decomposing, our labor rate to productivity ratios are the most God-awful on the entire planet (they are now even worse than the UK’s, and that is really saying something), and, as Wisconsin demonstrates, the people in this country still seem to feel that they are entitled to a six-figure gross income in exchange for doing manual labor that requires no more than 200 hours of vocational school training to qualify for.  We are a long way from Mario’s utopian renaissance. However, I do agree that at some point, the “genius” target of Mario’s man-crush will succeed in devaluing the dollar past a heretofore