Wednesday, March 23, 2011

The jury is still out on whether the Dollar Index is about to head significantly higher, but the fact that it has turned from nearly exactly where we'd anticipated makes it worth watching -- and trading from the long side for now.

A friend who runs a heavily trafficked gold site asked me where I thought the stock market would be trading in six months. I replied as follows:  I don’t usually go out that far in time, but if I had to speculate I’d say the Dow will be groping for traction at 9057 – a “midpoint” Hidden Pivot -- come September, provided the recent highs are not exceeded. (And if they are exceeded, I don’t think it will be by much.)  All bearish bets would be off, though, if DaScumballs somehow contrive to pop the Indoos throught the May ’08 peaks around 13136.

Yesterday's rally would have been even more bullish if buyers had not gotten cold feet three cents shy of the 36.505 peak recorded on March 13.  They can probably be forgiven, however, because any resistance at this peak was actively backstopped by two others just above it: at 36.550 on 3/8, and at 36.745 on 3/7. We'll wait and see how bulls handle these supply points, but the futures may need to impulse correctively on the hourly chart in order to get some running room.  If so, the 'p' midpoint of any corrective c-d could provide a great opportunity to get long.  Incidentally and FYI, trading aggressively one could have been long from 36.325, based on the camouflage pattern shown in the chart.

A corrective pattern begun in the wee hours reversed from within three ticks of a 1422.60 midpoint (see inset), providing encouragement to bulls. However, if the c-d low fails to hold, expect the selling to continue to at least 1416.20, a Hidden Pivot that can be bottom-fished with a stop-loss as tight as four ticks. The most bullish alternative for the near-term would be a pop tonight above a very obscure (5-min chart) look-to-the-left peak at 1429.50.

The 1296.75 target that I aired here a few days ago is proving more stubborn than one might have expected. In fact, after making a weak second top at 1296.50 early in the session, the futures are actually extending Tuesday's moderate losses this evening -- a little encouragement and spiritual nourishment, perhaps, for right-thinking, decent bears around the world. As of this moment, the selling has exceeded a minor 'd' target at 1284.75 by three ticks -- enough, probably, for us to infer that more selling awaits.  If ESM retraces 61.8 percent of the lunatic rally begun on Friday, that would bring it down to 1280.25.

The Dollar Index has put in a tentative bottom almost precisely where we'd expected it. The initial impulse leg projects to 75.69 -- a target that would appear to be a lock-up, since DXY has gapped through its sibling midpoint, 75.53, as evening trading has begun. It is too early to say whether this bullish trend reversal will have legs, but the forecast anticipated a potentially powerful move. We'll be better able to tell once we've seen how DXY handles the 75.69 target.  If it pops above 75.88 today, though, exceeding a minor peak recorded March 18 on the way down (60-min), bulls will be solidly  in charge, at least for the near term.

[With debt spinning wildly out of control and the States threatening to revolt against the tyranny of Washington, we asked some frequent contributors to the Rick’s Picks forum how they thought the nation would look five years from now.  In the essay below, Wayne Razzi, aka “Red Will,” predicts that “They” will win – as They always do. However,  before any clear winners can emerge, the nation will feel the ravages of the catastrophic debt deflation that “we” have long predicted. RA] I’m always both happy and humbled whenever Rick extends an offer to me to contribute an essay to Rick’s Picks, given the respect that I have for him and many of his forum’s contributors.  On this go ’round I have to state that I remain humbled but I can’t honestly claim to feel happy at the moment!  Here’s the reason:  Rick asked that I peer deeply into my own crystal ball, which is actually more of a considerably beclouded marble, to attempt to foretell what the world might look like economically in five years.  I take solace only in the fact that he didn’t ask for stock market predictions! Attempting to compress so many thoughts, countless trends, variables and unforeseen elements into a succinct forecast is extremely challenging. I turned to my markets and business partner of many years, an exceedingly bright fellow, and solicited his opinions.  A rarity then occurred in that he and I came to distinctly different conclusions.  His side will reveal itself once you’ve read through my thoughts on things that follows but I did find it interesting that he’s in the very same camp as our esteemed Mr. Ackerman.  My conclusion is that he and Rick are envisioning what should happen due to something akin to cognitive dissonance, which I use with the most polite