March 2011

Looks like traders are scampering up the Wall of Worry once again. The market had a dozen good reasons to sell off yesterday -- and it did, at least for a while; but when the dust settled, easy money had once again had its way.  Each time the E-Mini S&P pokes its greasy little snout above structural resistance, the sellers -- mostly corporate insiders, if we are to believe what we read -- seem to melt away. Now, a Hidden Pivot resistance at 1304.75 is the likely objective of the next thrust. Since its sibling midpoint at 1292.00 has already been exceeded by four points, this move should be regarded as an odds-on bet. If DaBoyz act a little gutsier, though, they'll go the extra yard with a push past a look-to-the-left peak at 1308.00 shown in the chart. If and when that occurs, bears once again had better dive for cover.

So, what was it that Europe and the U.S. sought to gain when they plunged head-first into Libya’s civil war?  Beats us. We can understand what motivated the French, since they were the first to act on the possibly mistaken belief that their former good friend Col. Qaddafy was headed toward certain defeat. Considering the way things are going, they may have to remove the word “Alive” from the “Wanted Dead or Alive” poster they’ve effectively pinned on Kadafy’s caftan. As for America’s involvement, no one seems to know why we got involved in the first place, much less what will be required of us after the bombing stops. Perhaps the French will be so kind as to instruct us when the time comes.  In the meantime, the “international coalition,” which also includes Great Britain, seems to be having a rollicking good time strafing loyalists forces and “protecting” the rebels. But it’s more than a little unsettling to see the ostensible allies squabbling over what is to come next, and who will lead.  If it is nation-rebuilding our politicians have in mind, then Kadhaffi may indeed have to be exiled, if not rubbed out, since he doesn’t seem like the kind of dictator who will be content to chill at the oasis. More likely, as we mentioned here earlier, is that he will do everything in his still-lethal power to avoid handing over Libya’s oil capacity to the U.S., France, Britain et al.   Meanwhile, events thus far have attracted the bemused attention of Germany, Russia, China and a few other ostensibly neutral spectators who, one gathers, would always be perfectly content to do business with Kadhafy. Although this coalition of the unwilling obviously relishes telling the world how appalled they are by the allies’ strategically senseless assault against Kadafie, the

Hitting price bullseyes may look impressive, but the real strength of the Hidden Pivot Method lies in its ability to correctly and confidently predict trends of different degree. During this class, we pondered some of the subtlest indicators imaginable on the chart of the Dollar Index. Although this vehicle recently turned from a low that had been precisely predicted, the question remains as to whether the rally will turn out to be the beginning of a major trend change. As you will see, a clear answer may lie in the very subtlest inflections of the lesser charts.

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.