Wednesday, December 7, 2011

I set the bar at 36.655 as the all-clear threshold for long-term bulls, but a lesser benchmark at 33.135 that I mentioned as well has been eclipsed by yesterday's rally. The burst of strength has brought into focus a bullish pattern that projects to as high as 34.270 over the near term (see inset).  That's a Hidden Pivot 'D' target, and its p sibling at 32.960 has yet to be conquered. However, it would take only a pop to 33.380 today to create an impulse leg sufficiently robust to make 34.270 an odds-on bet for the near term. Traders should consider using the two peaks just below 33.375 to leverage a camouflage 'buy'.

Crude has stalled at an important midpoint resistance at 102.15, but if it should pop through it energetically, look for the rally to continue to at least 109.31, its 'D' sibling. We should trade with a bullish bias for now, since one of these little 'camo' rallies is going to be the one that launches the January contract toward a scary new threshold. Use the 5-minute chart to find a suitable pattern for boarding, but please note that at that level, the first 'external' peak the rally would encounter lies at 102.12 (12/5).

Early Wednesday morning, March Silver was stealing up on a bullish threshold whose breach could portend more upside over the near term to as high as 34.270. Check out the chart that accompanies today's tout, since it offers a compelling picture as well as some useful price points for camouflage.

Because the turn came yesterday from just above the 1702.60 Hidden Pivot support where we were bidding, we hold no position officially. The futures look like they're about to fly or die, the corrective action since late September having gone on for too, too long. My trading partner John Boutiette, no slouch in the Hidden Pivot department, is focused on the trendline shown in the chart as a make-it-or-break-it level, and I would agree. A decisive push above the line, which comes in today around 1757.50, would doubtless send bears scrambling for cover. But until that happens, downside risk to as low as 1633.00 will remain.

All of the gurgly action of the last few days has taken place just beneath the external peak at 1270.75 recorded on November 14.  That makes the monster rally from 1147 suspect, since, having exceeded no prior peaks, it is not even impulsive on the daily chart. A minor upthrust from these levels would remedy that, but until such time as one occurs, and even in the wake of the recent 120-point explosion, the burden of proof properly rests with the bulls.

This Thursday morning, December 8th, Rick will be conducting a webinar focused on the state of global markets. Among the specific topics of discussion will be bellweathers such as the Dollar Index, T-Bond futures, the euro and index futures for the broad averages. During these events Rick examines a variety of issues with an eye towards providing actionable trading advice to attendees. Register now for the free event. Space is limited. Reserve your slot now.

No sooner had Merkel and Sarkozy put the finishing touches on the latest bailout rumors than Standard & Poor’s was threatening to downgrade the debt of 15 of the 17 euroland nations.  Recall that as the week began, France and Germany were talking up the latest supposed solution to the debt crisis.  Bigger and better than their last supposed solution, it drew a rave from that man of discernment and cunning, Tim Geithner, who pulled out all the stops in making much ado about nothing. “The eyes of the world are very much on Europe now,” he told reporters in Berlin.  "[We should be] very encouraged by developments in Europe in the past two weeks, including reform commitments in Italy, Spain and Greece.” Ahh, yes. Nothing like a little more austerity to resuscitate the economies of Europe’s deadbeats, right?  The prospect seems to have swayed no one at Standard & Poor’s, a firm that is out to prove to the world that it matters after having missed a hundred signs a few years ago that the banking system was in imminent danger of collapse.  The ratings agency has been doing its vengeful best to atone for the oversight, distancing itself from borrowers with whom it used to sleep around. The threatened downgrade would affect the long-term rating of Europe’s bailout fund, the European Financial Stability Facility. A decision reportedly is pending a review by S&P of the sovereign members’ books, and there’s a possibility that ratings could come down a couple of notches. That would put even more pressure on the ringmasters of Europe’s dog-and-pony show, including the U.S. Federal Reserve,  to counterpunch with sufficient easing to offset the increase in borrowing rates that would otherwise occur. A Mere Formality While an S&P downgrade would be a mere formality, it