Thursday, July 14, 2011

Round-number resistance near 1600 is likely to prove challenging, since it roughly coincides with a compelling Hidden Pivot resistance at 1597.80 that is shown in the chart. If bulls overcome this double stopping-power within a couple of hours of a first encounter, it would likely put bears on the run into next week, at least. Most bullish of all would be a close on Friday above 1600. That would put a 1652.00 target that comes from the daily chart (A=1389.80 on March 17) well in play.

October Sugar is closing on a 33.60 target first advertised here when the futures were trading around 27. That's quite a move, but given the clarity of the pattern that has pushed it this far, it seems highly doubtful that the rally will get past our number without a major correction. Traders should also heed the possibility of a trend reversal from as low as 32.72, a secondary 'D' target shown in the chart.

The dollar has plummeted these last two days, fueled in part by Moody's toothless threat to "review" America's credit rating. The collapse has come from a top that fell  0.46 points shy of a major target, but not before DXY generated a bullish impulse leg on the higher-level intraday charts.  A further decline breaching the 74.12 low recorded on July 3 would hint of a long, trendless stretch ahead, since it would create "dueling" impulse legs on all charts below the monthly.

The futures looked primed for a dive to 1280.50 by week's end, if not sooner. That's the Hidden Pivot target of the pattern shown, and as of late Wednesday night its sibling midpoint at 1304.00 has already been breached by 1.50 points. That's not quite enough to clinch the implied plunge, but just a tick or two more would shorten the odds. Alternatively, it would take a print exceeding a tiny peak at 1328.50 made July 11 on the way down to put buyers back in charge of short-term price movement.

The charts included with today's bullion touts are intended to stretch the bullish imagination, so be sure to take a look.  The E-Mini S&Ps, on the other hand, look like they're about to stumble.

We’ve been treating the debt-limit donnybrook on Capitol Hill as a joke, just like everything else that goes on in Washington, but it now seems more than remotely possible that the issue could turn gravely serious. Even allowing for the usual brinksmanship, it’s hard to imagine what concessions either side might make at this point  that would be significant enough to break the logjam. For its part, Moody’s – as big a laughing stock as D.C. politicians since the Great Financial Collapse of 2008-09 – has put America’s AAA credit rating “on review” for a possible downgrade, sending the dollar into spasms late Wednesday afternoon. Of course, there’s no way in hell Moody’s would actually downgrade U.S. credit, since that would trigger financial Armageddon.  Consider the mayhem that downgrades have already caused in Europe, where credit spreads for the PIIGs have widened as much as 250 basis points over German bundts. This has put the PIIGs in a financial death spiral that all the official happy-talk in the world can no longer counteract. Now try to imagine how a mere 50-point widening of spreads would affect a U.S. credit edifice that dwarfs Europe’s.  Add just a paltry few basis points to the interest paid on nearly $15 trillion of federal debt for a year or two, and pretty soon you’re talking about real money.  And then you could start worrying about how it would affect adjustable-rate mortgages in a depression-bound real estate sector, and the interest paid by households on revolving charge accounts. It would also knock Obama’s fiscal assumptions for a loop, since he’s counting on the fed funds rate to average 2.5% between now and 2020. If credit problems should cause this rate to revert to the 5.7% average that has obtained since the early 1980s, the additional