Friday, March 11, 2011

A moderate rally Thursday night from the day's lows was taking some of the sting out of the selloff. As of around 9:10 p.m., the bad guys appeared intent on preventing the futures from popping above a small peak at 35.470 made on the way down. If they fail, night owls should not be shy about using this impulsive breakout to leverage a bull trade that would carry little theoretical risk.  _______  UPDATE (1:45 a.m. EST):  A poke a penny above 35.470 created a potential 'B' and an impulse leg, but the subsequent pullback wasted the pattern by pulling back to exceed 'C'.  Also negated for the same reason was a bigger pattern (15m) with an 'A' low at 34.770.  Silver seems to be resting, not quite ready to fly.  In any event, it would now take a thrust to 35.775 to re-energized the 15-minute chart, since that's where the first 'unspent' external peak lies.

Gold is likely to be dragged down by the broad averages if they continue to fall, but in any event, yesterday's selling in bullion was less intimidating than it may have seemed if price action on the hourly chart is considered. Notice in the chart (inset) how bears reversed course just shy of a secondary low at 1400.10 recorded a couple of weeks ago.  Lacking in guts, perhaps?  That's my take, but the first confirmation would come if the abc rally underway at this moment completes to its 'D' target, 1424.80 -- or better yet, exceeds it.  As we went to press, the rally still lay a couple of points shy of the 1417.60 midpoint, a resistance you'll want to watch in order to estimate how much energy buyers might bring to Friday's session.

A Hidden Pivot I'd flagged here yesterday at 102.40 caught a tradable low just four cents below it, at 102.36.  The bounce carried nearly a dollar, to 103.32, so there was time to take profits if you gutted out an initial pullback from 102.96  to within a penny of the low. Thursday night, a more impressive bounce was under way from Thursday's bottom at 100.62.  It could get as far as 105.07, or even to 105.78, but first a midpoint resistance at 103.61 will have to be conquered.

There are two targets below, and shorts who catch a ride should be alert for a bounce from either (or perhaps both:  11921 or 11877. The lower number maxes out the hourly chart, suggesting that scalpers would enjoy favorable odds attempting to bottom-fish there with a stop-loss as tight as 6-7 ticks.  Keep in mind, though, they you will be getting in front of a downtrend that could only just beginning to show its power.

Yesterday's exhilarating plunge may have felt special, but on the hourly chart (see inset) it was of a piece with the chop-and-slop price action of the last few weeks.  Is it the initial rumbling of an avalanche?  We may be better able to answer that question after we've seen how aggressively sellers attack a Hidden Pivot support at 1286.50. That's my minimum downside projection at the moment, but look out below next week if it's decisively exceeded, especially on a closing basis.

No one thought it would be easy for state and local governments to get their budgets under control. However, by eliminating collective bargaining for most public employees, it appears that Wisconsin Gov. Scott Walker may have paved the way for other states to succeed at it. One good thing to notice is that Wisconsin turned out not to be…France.  Try to imagine what would happen if a synateur were to propose raising the retirement age by a year or two, or shortening the French worker’s god-given two months of vacation by a week. You’d have a torch mob marching on Paris within hours, and the lawmaker’s effigy would be hanging from lampposts from Paris to Marseille. Windows would be smashed and cars set aflame.  Not in Wisconsin, though. Labor turned out tens of thousands of angry if peaceful demonstrators, but in the end that wasn’t enough to carry the day. There wasn’t a Democrat in the chamber when the final vote came yesterday, but the result was clear enough: only police and firefighters, who put their lives on the line every day, will retain collective bargaining rights.  Few workers in the private sector will feel much sympathy for Wisconsin’s public employees, since the latter have for years enjoyed an extravagant level of health care and pension benefits that the private sector can no longer afford. Neither can taxpayers, though, and that was the point all along.  The labor unions will turn out in force in every state everywhere Gov. Walker’s legislative tactic is tried, but they will be vastly outnumbered by those who would pay dearly to maintain the status quo. Moreover, so many states and municipalities are verging on either bankruptcy or truly drastic cutbacks that there will be no choice about public workers settling for less. Much less.

A childhood friend of mine, Bonnie Roche-Bronfman, a New York architect with a terrific imagination and talent that radiates in many directions, is involved as set designer for a production called "From the Fire."  The drama commemorates the 100th anniversary of the tragic Triangle Shirtwaist Factory Fire, a galvanizing event in the evolution of the country's labor laws and social reform.  The show is scheduled for a five-day run in the Judson Memorial Church and has already gotten some great press, including an upcoming article in The New Yorker.  For show times, tickets and further details, click here.