October 2011

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

Here's the latest from our far-flung correspondent, good friend and intrepid explorer Jonathan Auerbach, who is always ready and eager to do business where most others fear to tread.  Today he is evidently navigating the shoals between Israel and Gaza: "Entering the occupied territory of Palestine, problematic at best, reached new heights over the weekend for our merry band. One of us, a UK citizen by birth, with one of those funny names including the letter 'K' was interviewed for over an hour by soldiers and others convinced he was Iranian. I, always intrepid and straight forward with authority failed the metal detector at the Allenby bridge and was immediately segregated in a holding area for a 30 minute wait until I was pulled into a cubicle by a security person, who pulled the curtain closed and began slipping on rubber gloves; I prepared for the worst. He smiled and simply said, 'So, where do you have the weapons?'...'You have got to be kidding', I responded as I explained the location of my titanium prosthesis (Superman for those who play squash with me). An intimate pat down and wanding followed after which he said 'OK' and pointed me to the next waiting station without passport, by the way. Around an hour later 3 soldiers, one with my well-worn passport, called me away and interviewed me. 'Why are you coming to Palestine?' Answer: 'I am a broker and I am bringing two clients in to look at their investments and perhaps make more' Bad answer? Not where I come from. "More waiting followed and finally we were just told to go, met our driver on the other side and headed for Ramallah (another two Israeli checkpoints along the way). Ok, let's cut to the chase. Palestine has an electronic book-entry stock

Shortly before 2 a.m. in New York, bullion futures were screwing the pooch while index futures were plodding joylessly toward yet another bullish target.  As I implied here earlier, the new October Surprise is... "No Surprise!"

Higher or  lower, the direction of the next, probably meaningless, feint is a coin-toss right now, so there's no point in getting all het up about the supposedly bullish or bearish pattern you may have detected with your magnifying glasss trained on the 5-minute chart.  Like the chart I've reproduced with today's Gold tout, the one for December Silver (see inset) shows where to set alerts that can tell us when to get excited.  Incidentally, the pattern that produced the lower alert is findable on the 60m chart, where A=36.680 on  9/22.

The 647.75 entry signal for the pattern shown triggered last Thursday, and although there are no subtle "external" peaks left that we can use to establish a low-risk entry point, we can at least surmise that the 688.75 target will be achieved if buyers can blow past its 661.50 midpoint sibling.  Accordingly, I'll suggest zooming in on a five-minute chart if and when that last number is closely approached, the better to identify an uptrending abc small enough to carry a commensurately small stop-loss.