Tuesday, November 22, 2011

There's a minor  hidden support at 30.195 where we could attempt to bottom-fish, but otherwise my advice is the same: Look for a descent to at least 28.385 before bulls turn things around.  However, they could do so instantaneously with a print today above 32.675, a tiny peak created last Thursday on the way down.

The benchmarks we've set for bulls to regain unambiguous dominance were ambitious, lying at 1747.70, or even more decisively, at 1833.00. Absent a determined push toward those numbers this week, we can expect the futures to continue their downward course to at least 1627.30, an important Hidden Pivot midpoint support identified here earlier.  Bulls would earn a respite, however, and the benefit of the doubt, if they can merely exceed 1695.20 today.  That would create a bullish impulse leg on charts of lesser degree, as shown.  Click here if you’d like to learn more about the Hidden Pivot Method.

An 1152.25 downside target remains valid, notwithstanding a squeeze on shorts Monday night that has added the equivalent of about 50 Dow points to this gas-bag.  An immediate rally target at 1199.50 has little to offer night owls, but a pop today above the 1208.50 peak highlighted in the chart would be reason to pay heed. ______ UPDATE (1o:45 a.m. EST):  The futures topped overnight at 1199.00 before dropping back 15 points to a so far low of 1184.00.

Hard as stocks and bullion got hit yesterday, there are outstanding targets well below these levels. Please note that there is bad news in today's HUI forecast, since it implies a possible 15% fall from current levels.

We view yesterday’s stock-market plunge as unrelated to the failure of the not-so-Supercommittee to compromise on a paltry $1.2 trillion in budget cuts over ten years. No one expected a deal in the first place, and even if there had been one, its effect on the economy, let alone on the deficit, would have been negligible. Who would ever have believed even a decade ago that a “mere” trillion dollars in Federal outlays would hardly be worth arguing about? Still, the way stocks fell, one might have inferred investors actually cared about the outcome. The nightly news pretended it mattered, perhaps because there were no titillating alternatives to serve up on a slow-news day. Wall Street did its patriotic bit as well, feigning concern by sending the Dow Industrials 250 points lower. In fact, there was bound to be a little knee-jerk selling by institutional traders fearful that their competitors would be selling “on the news.” In our view, markets are driven higher, lower, and sometimes nowhere by mysterious cyclical forces that we will never quite understand. Moreover, it is the cyclically driven price swings that color our perceptions of the news, not the other way around. Trumped-up headlines aside, one thing likely to send a wave of genuine fear through Wall Street is the impending failure of Europe’s deadbeats to get Germany to bail them out.  And, make no mistake, it is only Germany that could be imagined big enough to pass itself off as a credible savior for all of Europe. France is usually treated as Germany’s co-equal in bailout discussions, but in fact France is not a significantly better credit risk than Italy or Spain at this point. Under the circumstances, the unelected bureaucrats who purport to manage Europe’s affairs are hoping to gain support for a