Thursday, June 23, 2011

The Gold Bugs Index looked like a good bet to fall to at least 469.69, the 'D' target of the corrective pattern shown, but yesterday's upthrust was so robust, exceeding no fewer than four 'external' peaks on the hourly chart, that bulls could get a reprieve. If so, we should expect this vehicle to retrace a bit of the rally today and then take another leg up exceeding the labeled peak at 541.69.

The swift selloff that sprang yesterday's bull trap has come down to the exact, 1545.40 midpoint of the corrective pattern shown, but any lower will be indicating 1538.80.  You can try bottom-fishing there with a stop-loss as tight as four ticks, but if it's hit the futures would be signaling more weakness and a possible test of Monday lows several points beneath. _______ UPDATE (11:17 a.m EDT): The Hidden Pivot at 1538.80 evinced nary a bounce -- only three hours' worth of oscillations that turned out to be distribution for yet another wicked leg down.  This has done no serious damage to the hourly chart, believe it or not, but the selloff would become menacingly impulsive were it to breach the 1504.90 low recorded May 23 on the way up. Alternatively, and based on today's so far low at 1515.00, the August contract would need to rally above 1532.20 today to regain the advantage. That's where a small but important peak was made on the 5-minute chart as the futures plummeted this morning.

Notice in the chart how yesterday's head-fake failed by a single tick to get past an "easy" look-to-the-left peak recorded on June 12. This is ample reason for us not to give bulls the benefit of the doubt when trading gets under way today in earnest. This mildly unsettling sign of timidity would be mitigated, however, by an upthrust touching 36.775 -- and decisively negated by a further push to 37.645.  But if the high turns out to have marked the onset of a minor correction, look for the futures to grope their way down to at least 35.150 in search of traction.  ______ UPDATE (11:05 a.m. EDT): The futures have indeed fallen hard today, hitting a so-far low at 34.800.  On the hourly chart, the bounce-less, 35-cent overshoot of a Hidden Pivot support has put into play a new target at 33.310 (A=37.860 on June 9; B=34.400 on June 14.  Camouflageurs could look to get short on a rally to around 35.040, the C-D midpoint of the pattern.

Yesterday's nasty head-fake squandered a minor, bullish impulse leg on the hourly chart, but a bigger one is very much intact and presumably waiting to be exploited by DaBoyz.  The proximal cause of the selloff was a downbeat pronouncement on the economy by Bernanke, who evidently can no longer hope that "bad" news will be received on Wall Street as "good" news for stocks. Perhaps if the Fed considers taking administered rates below zero, traders will get back in the spirit of things, always hoping for yet more easing whenever it looks like the economy is doing another kamikaze. Concerning the E-Mini futures, I've displayed them on the 240-minute chart so that you can see how little damage was done when They pulled the rug out late in the session. In theory it will take a rally of at least 9.50 points to get a C-D follow-through leg under way.  From that point, the move would have an additional 28 points of upside potential -- equivalent to a Dow rally of close to 300 points. Most immediately, with the futures in a tightly engineered holding pattern shortly after midnight, night owls and camoflageurs should monitor the 5-minute chart for the subtly impulsive blip that could signal a resumption of the bull trend. ______ UPDATE (10:40 a.m. EDT):  We'd grown so accustomed to short-squeeze rallies launched off shallow corrections that this morning's long-squeeze collapse off a shallow distribution came as both a surprise and a delight. It always feels right as rain when stocks are moving synchronously with the economy, and so the selloff has come as a bracing acknowledgment of a darkening reality. Pivoteers may have noticed that the so-far low came within less than a single point of the 1258.75 target predicted on the hourly chart by these Hidden

Helicopter Ben was deep in denial yesterday following a two-day Fed meeting, telling reporters he’s puzzled by recent signs of deterioration in the economy.  "We don't have a precise read on why this slower pace of growth is persisting." Is this guy a hoot, or what?  Earth to Bernanke: The Great Recession never ended!  In fact, the term “Great Recession” itself is popularly used by plain folks to assert that economic hard times are very much with us, notwithstanding brazen statistical claims to the contrary.  As anyone can see, many trillions of stimulus dollars have yet to improve a dismal employment picture one iota -- only kept it from getting worse; nor have those “dollars” boosted household incomes or real estate prices. What they have boosted are bank profits and the prices of stocks, commodities and basic goods.  Surprising no one, Mr. Bernanke also failed to mention the still-deflating housing market as a possible reason for the punk economy.  Who but a Fed chairman could fail to connect the dots?  It seems not to have occurred to him that consumers are no longer binging because their homes have continued to plummet in value – another 4.2% in the last quarter alone. In a policy statement issued after the meeting, the Fed muckety-mucks blamed the usual suspects for the weakening economy: higher energy prices and the disaster in Japan.  Perhaps Bernanke had second thoughts about trotting out such a lame explanation, however, and that’s why he deflected the matter by feigning cluelessness. Whatever the case, although he further widened the cognitive gap between the government’s spinmeisters and the working stiff, the Fed chief may have bought time to feign yet more cluelessness when he admitted that the..."sluggish recovery" could linger into next year.  We wonder what he sees for 2012 that