Tuesday, October 18, 2011

It would take just a modest rally to get past two 'external' peaks on the hourly chart. If it happens today, take it as a sign that yesterday's sharp thrust will not prove to have been a one-day wonder. Your screen alert should be set at 140^19, since that's where the move would turn impulsive on the intraday charts.

Yesterday's rally looks promising because each of its two discrete thrusts created a bullish impulse leg on the hourly chart.  Meanwhile, the pullback from the intraday high at 77.25 is working on a second thrust without having gone impulsive as of around 12:35 a.m. EDT. This tends to corroborate a mildly bullish picture, at least for the moment. It would become more bullish still today if bulls can follow through with a push exceeding the 77.29 secondary peak from October 13.

The over-under thresholds can stand as drawn here yesterday (see 10/17 archive posting for chart and details), but more immediately, we might focus on the corrective pattern shown, since it has the potential to drop a low-risk "buy" into our lap. That would occur at the 30.785 Hidden Pivot support shown. 'Camouflage' will be essential here, though, since the target is closely coincident with a structural support at 30.710 from October 7 that is all but certain to draw the rabble. _______ UPDATE (9:16 a.m. EDT): December Silver got whacked well beyond our target, creating a quite-bearish impulse leg on the hourly chart in the process. The so-far 73-cent bounce must be presumed to be setting up a D-C follow-through leg to the downside, but bulls would earn the benefit of the doubt if they can turn this disconcerting price action into "dueling" impulse legs with an upthrust, by tomorrow, that exceeds a micro-peak 31.725.

The Dow's failure, after two attempts, to get past the 11717 peak recorded on September 1 is bearish on its face, but technically buyers can keep trying with no penalty as long as the pullbacks don't 'go impulsive' on the hourly chart.  That they would do, albeit only mildly, with a print today below 11326;  however, a feint beneath the 11051 low from a few days earlier would make for a more impressive jolt to the bullish argument.  Notice that yesterday's selloff doesn't look so bad on the Indoo's hourly chart -- not that it did on the E-Mini chart either. But rather than speculate on what this might mean, we'll simply set a screen alert at  11050 to warn of potentially significant trouble.

I didn't fall in love with the bullish pattern in yesterday's chart for no good reason, since it has always worked. Not this time, though, and although it would be no stretch for me to infer that the market has caught a whiff of something scary out there, I'm going to let my instincts be guided entirely by the simple action of impulse legs on the hourly chart. This is notwithstanding my gut feeling that They cannot pull the plug as long as the Merkel-Sarkozy supposed plan awaits explanation and headline treatment. Concerning impulse legs, yesterday's plunge did not actually alter the 1256.50 target, since its 1185.25 point 'C' was not breached.  It likely will be today, though, and if so, we can use the 1176.75 low from October 10 as a tripwire to warn of a pick-up in the tempo  of the selling. Whatever happens, it is the c-d down-leg that follows this presumptive impulse leg that will perforce yield the most useful infomation. If the rally has a second thrust in it, we should see that follow-through reverse from no lower than its 'd' target.  More bullish still would be a reversal from its 'p' or above.  I've sketched this hypothetically so you can see it in pictorial form.

So comfortable had I become with the stock market's daily, thrusting assaults on rationality that I neglected to consider even the possibility of a decline, especially one so refreshingly nasty as what we saw yesterday.  My good friend Doug B, The Savviest Financial Advisor I Know (the number two guy on the list is not even close, by the way) thinks this is the beginning of a devastating correction that will bring valuations more realistically in-line with an economy that we both agree is headed into a full-blown Depression. While he has logic on his side, and even some contrarian boost from the hordes of advisors he insists are too, too bullish these days, I'm going to fall back on technical analysis alone to tell me what might come next. So check out today's touts for the E-Mini S&Ps and the Dow if you're interested in a closely reasoned look at the charts using Hidden Pivot Analysis. Incidentally, I'll be taking a look at the technical runes in real time later this week. Details will follow shortly, but this will be an online analysis session open to all and to which you can invite your friends.

Yesterday's dirge added virtually nothing of interest to the technical picture, so I'll let the tout stand for another day. It was given as follows: Use our old friend -- a look-to-the-left peak at 1704.90 -- to signal when bulls are ready to get serious. On the intraday charts, that would create the most promising impulse leg since September 27, when the futures made a first down but fumbled the ball away on the next play.  The sideways move since then has been tedious beyond belief, and that's why we should simply set a screen alert at 1704.90 and snooze till then. Or trade something else.  Alternatively, if our bored complacency should be shattered by a feint lower -- and that's all it would likely be as far as I'm concerned -- it would take a two-day close beneath 1585.50, a midpoint support, to signal possible trouble. (Note: Monday's marginal new high altered the 1585.50 'p' by two ticks -- not enough to warrant redrawing the chart.)

So lame is Europe’s latest attempt at spin control that Americans could view it as comic relief from our own worries about the U.S. economy’s accelerating death spiral. Creating a global diversion was doubtless a goal of the exercise, which featured Sarkozy and Merkel, president and chancellor, respectively, of France and Germany, posing for the photo-op unveiling of a scheme – sorry, no details at this time –  to put Greece and the rest of the PIIGS on sound financial footing. Never mind that France itself starts to look like a financial basket case if one scrutinizes their books too closely; or that the German people, if not yet their leaders, have lost their appetite for bailing out the rest of Europe. And never mind either that, rather than describing their supposed plan, Merkel and Sarkozy have merely promised to tell us more about it in the fullness of time – reportedly at a November meeting of Euroland’s potentates, wizards and feather merchants. To their dubious credit, and perhaps owing to an understandable desire to avoid the derision of the world, the two leaders did not refer to a “secret plan” when they deliberately left it under wraps; no, they alluded merely to “a plan, ” and we can only surmise that they were fearful of raising the public’s expectations by implying that something new or unexpected was about to be tried. Better instead to maintain and nurture the low-grade cynicism with which most of us have come to regard these announcements.  That cynicism seems manageable, at least – presumably until market forces cause the whole shoddy edifice to crumble. In the meantime, Sarkozy and Merkel have bought perhaps a month’s time for the hopeless illusion that political Europe will remain united under a single currency.  Sustaining the endgame for