Wednesday, June 15, 2011

The June contract turned flaccid after handily exceeding a rally target at 124^07 and has since created a strongly bearish impulse leg on the intraday charts. Shifting to the September contract, the pattern to watch is still developing on the 240-minute chart, having yet to create a point 'C' high.  If the still dominant bull trend is to resume, we should expect the correction to fail to reach its 'd' target -- to instead reverse from near the still-unformed c-d midpoint.

Monday's dive turned the hourly chart bearish by exceeding two distinctive lows recorded, respectively, on May 26 and June 2. To undo the damage and restore control to bulls for the near-term, at least, the futures would need to hit 1538.25 today, surpassing an important peak made last Friday on the way down.  Otherwise, the August contract is vulnerable to a fall to 1502.20, or to as low as 1485.60 if that last number is exceeded on a closing basis. The chart shows how each of these numbers was derived.

In the chart that accompanies today's tout for the September 10-Year T-Note, I've sketched out a hypothetical correction that shows how we may be able to tell whether long-term rates have bottomed. If so, as shown, the abcd retracement should not reach its 'd' target.

Silver's rally into the close was unpersuasive, although bulls nonetheless held a slight edge at 9:30 p.m. EDT  attributable to the creation of a tiny impulse leg yet to be negated.  The still unachieved target of a somewhat larger pattern is 35.740, but as you can see in the chart, the futures will need to go one tick better to create a new impulse leg that would refresh the uptrend.

The futures are down slightly in night trading, presumably to give the boys running run to stick it to shorts again on Wednesday.  Night owls can try bottom-fishing at 1279.00, the 'D' target of the retracement pattern shown. Its sibling midpoint may endure even though it has already been exceeded by two ticks, but any further slippage would likely send the futures groping for traction down to the 1279.00 target. Since there's a coincidental structural low at 1279.50, camouflage is the preferred method for getting long here.  Keep in mind that the futures need only hit 1290.25 today to be in a position to bully bears until week's end or longer. _____ UPDATE (2:23 a.m. EDT): The futures took a feeble, 2-point bounce from the 1279.00 pivot and then relapsed to a so-far low three ticks beneath it. I'd suggest exiting now for a small profit, since the slight breach hints of further weakness ahead.

For proprietary reasons, I did not display in today's commentary a weekly chart of Bank of America that shows so clearly why it is headed for the zero axis.  The chart is included here, however, so that you can see for yourself how compelling the technical picture is. What is surprising is that we have heard so little about evidently grave problems at the bank as its shares have fallen by more than 80 percent. A silent crash?  The chart speaks for itself.

Stocks got a lift yesterday from retail numbers that supposedly weren’t as bad as economists had expected. Sales dropped “only” 0.2% last month versus economists’ dartboard expectation of a 0.6% decline.  Because it was merely a bunch of economists who were doing the expecting, perhaps we shouldn’t be surprised that the numbers were so far off.  No matter though, since the not-totally-disastrous stats were exactly what the doctor ordered to send shares into a bullish spasm that left the Dow sitting 123 points higher by day’s end. The sales data evidently had been leaked Sunday night, and DaBoyz lost no time using it to put the  squeeze on bears.  They effortlessly ran the index futures up the equivalent of more than a hundred Dow points in thin trading overnight, all but guaranteeing that the broad averages would have to play catch-up on the opening bell.  This is exactly what they’ve been doing for more than two years as the Mother of All Bear Rallies has run its course, but in psychological terms, they don’t seem to be getting as much bang for the buck. There was little joy in Mudville, for one, where a trader quoted by the Wall Street Journal allowed only that stocks were due for a snapback rally. However, he added, “I don’t think one day makes a trend.” For sure. Permabears looking for the dark cloud rather than the silver-flecked lining need only ponder the hourly chart of the E-Mini S&Ps above. Notice how yesterday’s supposed stampede turned docile just inches shy of two important prior peaks.  We’d have been impressed if the rally had gotten past those peaks on the first try, but now they’ll have to try again on Wednesday, presumably with a running start from yet another thinly traded night session. While it