Tuesday, November 1, 2011

Just when you're ready to give up on the Bonds, they whip around and uncork the nastiest rally in a month. The high shortly before 4 a.m. EDT has tied an important external peak recorded a week ago, and it would take but a further 3/4 of a point from there  to knock off a second 'external' at 141^00, creating a powerful bullish impulse leg on the hourly chart.

See-saw action created a bearish impulse leg on the hourly chart with downside potential to as low as 1680.90 over the next day or two. The midpoint Hidden Pivot support lies at 1705.10, a few tick beneath yesterday's low, and if it's breached on a closing basis or by more than 1.50 points intraday, that would shorten the odds of a further fall to 1680.90. Alternatively, bulls would need to hit 1731.10 today to get out of immediate jeopardy. The lowermost number can be bottom-fished with a stop-loss as tight as six ticks, but a 'camo' entry would be better. ________ UPDATE (10:10 a.m. EDT):  The 1680.90 target caught the low of a $44 plunge within 30 cents. The subsequent $32 bounce was a doozey, allowing one to trade today's price action quite profitably if one trusted the Hidden Pivots posted above.

A rally that achieves the 77.21 Hidden Pivot target of the pattern shown would tie the external peak recorded on September 21, but it will take a single tick more to turn the thrust into a promising impulse leg on the daily chart.  Notice that there are some higher peaks just to the left, and it is above those peaks that the move will become a good bet to extend into November -- especially if they are exceeded today or tomorrow.

The US dollar index blasted higher on Sunday night, and the action since then gives us an upside target of 77.340.  As the attached chart shows, the dollar's quick gains surpassed numerous external prior highs, but follow-through to the "D" target will be needed to take the index past the prominent 76.870 high of last Wednesday.  Should that occur, the dollar's chart will look a lot less dire than it did at the end of the week.  The futures contract has a small $5 tick-value, allowing traders to calibrate risk very precisely.  Dollar skeptics can short the 77.340 "D" target with a stop no lower than 77.355.  (Posted by Doug "harry" McLagan)

The current pullback in S&P futures appears as likely to give us upside targets as it is to morph into a bearish impulse wave.  Yesterday we were looking for at least a 30% retracement of last week's strong up-move, and we got more than we asked for.  With nearly 70% of the gains given back, the current low of 1238.75 will probably have to hold if we're going to get actionable bullish targets out of this pattern, which would be confirmed by a print at 1257.00.  A further decline to below 1216.50 would yield a bearish impulse wave for which there is a ready-made one-off "A", as depicted in the attachment.  The decline accelerated around 2:00pm yesterday, and thus far it hasn't given us any structure to work with.  (Posted by Doug "harry" McLagan)