Monday, February 6, 2012

The news media have gotten revved up about a possible pre-emptive strike by Israel on Iran's A-bomb facilities, but if it were imminent crude would be warning us by moving higher rather than lower (just as it did, mysteriously, two months before the U.S. invasion of Iraq). So that we can tune out the hysterical noise, we'll want to keep close tabs on the March contract by setting a screen alert at 103, somewhat below December's high, to warn of an impending conflagration.  Incidentally, Rick's Picks subscribers receive real-time alerts about such things. Want to try a free trial subscription? Click here.

Look for the correction to bring SLW down to at least 35.59. the Hidden Pivot midpoint of the pattern shown.   You can try bottom-fishing there with caution, but bear in mind that if the support is breached by more than about 4-5 cents, the futures would be signaling further vulnerability down to at least 34.83, its 'D' sibling.

Friday's downdraft was impulsively bearish, but the good news is that sellers needed a rally and a running start to breach the required two prior lows. Also, their follow-up push failed by two ticks to reach the 33.455 midpoint support. This is sketchy evidence on wish to base a bullish outlook for the near term, but it's worth noting nonetheless.  Alternatively, if bears have any real gumption, they'll finish what they started Sunday night or Monday by pushing the March contract down to the midpoint pivot's 'D' sibling at 32.915. That number is valueless for a straight bottom-fishing bid because it lies three ticks from a marquee low  at 32.930 low recorded last Tuesday, but it will suffice as a place to try to get long if you do so using camouflage.  This implies getting long on the first uptrending x signaled from within perhaps 1 to 2 cents of 32.930. I'd suggest using a chart of 5-minute degree or less.  Click here for information on how you can do these trades yourself.

Friday's upthrust cleared an important peak at 1763.00 from December 8, refreshing the bullish impulsiveness of the daily chart.  My hunch is that it will take another day or two of consolidation before the futures are ready to roll again. However, because all three price points of the rally pattern we'd use to get long are single-bar, we should be alert for a 'surprise' upthrust to 'X' that could be converted into a camouflage opportunity on charts of lesser degree. _______ UPDATE (3:43 a.m. EST): The futures are getting hit early Monday morning, down as much as $18 to a so-far low of 1721.90.  The nearest Hidden Pivot target below is 1719.70, but if it fails, look for the weakness to continue down to at least 1702.00 over the near term.  Alternatively, bulls would need to hit 1742.70 to turn the tide.

Friday's buying spree was robustly impulsive on the daily chart, surpassing no fewer than one internal and two external peaks.  This all but guarantees that the S&Ps will eventually push above the highs of last spring and early summer. Notice that the rally did not take out the topmost of them at 1344.50. This could set up a possible 'camo' buying opportunity, since the action so far is likely to be read by most traders as a double top with that high.  We don't care about the fact that there was no breakout -- only about the creation of an impulse leg that, on a B-C pullback from Friday's high, could subsequently trip an 'X' entry signal. I've sketched this out hypothetically for the benefit of camouflageurs intent on finding a way in on a chart of smaller degree.

As last week ended, one might have believed Wall Street investors had just about everything wrong.  Stocks were up sharply on bullish payroll news that flatly contradicted something every American knows – i.e., that the Great Recession is still very much with us; T-bonds were getting whacked on the flimsy assumption that the economy is picking up strength; and gold and silver were under attack because, well, because all was right with the world.  Even the hacks and scribblers who bring us the news did their bit to feed Friday’s feel-good binge.  For one, there was nary a discouraging word on the Web’s main news pages about Greece and its slow-motion bankruptcy – only a story about how Europeans were working diligently to protect the homeless from a cold snap.  And the left-tilting L.A. Times, thinking wishfully, weighed in with the most fatuous story of the day:  an analysis piece saying that the payroll numbers could prove to be a turning point in Obama’s reelection year -- the day when he shifted from slight underdog to favorite. All of which led us to post a link at Rick’s Picks to some sobering counterpoint in the form of an essay, Peak Money Arrives. Here’s an excerpt to ponder lest you grow giddy over Friday’s silly headlines: “The world is running out of money. If money is credit, and credit relies on confidence, there is not enough confidence in the financial system to supply the world with the money it needs. Since the initial credit crisis struck in 2008, credit and money have been withdrawn from the system in such staggering amounts that international trade can no longer grow. The world’s central banks are playing a rear guard action by acting as lender of last resort to banks that no longer trust