Thursday, September 15, 2011

Using Hidden Pivot analysis rigorously over time can help sharpen our trading and forecasting skills. Although the process advances through an accretion of mechanical skills, as our bag of technical tricks grows over time we begin to develop what some would refer to as “market instincts” or “horse sense.” Acquiring such instincts is a task at which anyone can succeed. All it takes, as this tutorial session demonstrates, is the patience and diligence to consider the myriad subtleties of impulse legs as they play out on price charts.

At around 3:20 a.m., December Gold was closing on a minor support where I've suggested bottom-fishing. If the Hidden Pivot gets trashed, though, it would shorten the odds of the futures reaching a previously identified correction target at 1771.50.

If December Silver slips below the 40.085 midpoint support shown on a closing basis, look for more weakness down to at least 38.760, its 'D' sibling.  That Hidden Pivot can be bottom-fished via a 38.765 bid, stop 38.740, although camouflage will always be the preferred strategy if you can figure a way in. Alternatively, bulls would be back in business on a print today exceeding 41.500.

The 1771.50 correction target given here earlier remains viable, but we shouldn't let that discourage us from trying to leverage a low-risk bottom-fishing opportunity at the 1804.80 'd' target shown.  Note that that Hidden Pivot is backstopped by a structural support at 1804.50 recorded Tuesday on the way down. Alternatively, a pop today hitting 1832.10 would put bulls back on the offensive.

December Crude looks poised for a $10 fall to 78.60, a midpoint Hidden Pivot support that we can use as a minimum downside objective for the near term.  If and when the futures get there, we'll want to bottom-fish the prospective turn aggressively.

The 715.75 target shown in this two-minute chart looks very enticing, so I'll suggest buy-stopping the first point 'x' that occurs on an uptrending ABC pattern to get long.  That is simple camouflage, although this pattern looks almost sweet enough to bottom-fish at the pivot itself with a one-point stop-loss.  Note that there is also an 'external' peak at 749.00 that could come in handy not only for determining when bulls are back on the attack, but as a possible lever for a 'camo' trade if the futures don't come down to our 'd' retracement target. _______ UPDATE (3:47 p.m.): The futures have been as low as 714 today, but the initial bounce of 5 cents from very near where we'd expected did not generate any camouflage entry opportunities, even on the one-minute chart.  You should continue to look for such an opportunity at these levels, but be sure to apply the impulse-leg rules rigorously before taking the plunge.  I am not spelling out those rules explicitly here because they are proprietary, but if you have concerns or doubts, I would encourage you to air them in the chat room.

If our perspective is the 240-minute chart, yesterday's rally was a yawner. Even so, we'll need to respect the impulsiveness of it, along with the prospect of a 'c-d' follow-through.  The correction has already qualified as a legitimate 'b-c' leg, having fallen below the 1182.50 "window" line. Now, it would take a rally touching 1187.00 to trip a theoretical entry signal. Since 10 points (i.e., $500) of entry risk is about ten times what we will accept on any trade, a long entry will necessarily entail camouflage.  Accordingly, you should zoom down to the 15-minute chart or lower to find your 'x' entry spot if and when the futures approach 1187.00.  Please note that that number -- though not necessarily the bull trade -- would be invalidated if there's a dip below 1176.75 overnight. _______ UPDATE (12:48 a.m. EDT):  A camouflage entry at 1188.00 was possible around 5:45 a.m. and although the position was a "success," reaching its 1188.75 midpoint, you'd have needed to reboard after getting stopped out to catch the maniacal, short-squeeze leap to  1199.75 on the opening.  That, by the way, is the exact Hidden Pivot Midpoint of a 1224.00 target that comes from the same pattern that I've displayed (point 'C' was ultimately to equal 1175.75), so any progress above it would ordain more upside of 24 points.

The Dow was up nearly 300 points at its highs yesterday, savaging bears who may have gloated over last week’s equally impressive decline.  These short-squeeze rallies are usually catalyzed by economic headlines, and it doesn’t seem to matter whether the news is good or bad, since the markets have a mind of their own and can sometimes surge on the gloomiest data. U.S. markets actually seem to thrive on bad news as long as it does not emanate from Europe.  But it is probably just force of habit that causes shares to rise at such times, since, for nearly a decade, ostensibly bearish stories came to be associated with a likelihood of further easing by the Fed. Easing is of course no longer possible with administered rates already at zero, but any news that might help us cling to the notion that things can’t get much worse is arguably a plus for stocks.  So what were the day’s headlines? The top stories could not have been much gloomier. For starters, we learned that the inflation-adjusted income of male workers has not increased since 1978. Nor have households fared so well in more recent years despite Keynesian and monetary stimulus amounting to many trillions of dollars. Even with all of those digital bucks flooding the financial system, however, the income of the typical American family appears to have dropped for a third straight year and is currently at 1996 levels after adjusting for inflation.  A report on this in the Wall Street Journal noted delicately that the statistics showed “how devastating the recession was [our emphasis], and how disappointing the recovery has been.” Rodney Dangerfield That’s putting it mildly – not to mention, in a way that denies what we all know – i.e., that The Great Recession never left us…has