Wednesday, June 13, 2012

Our #1 market bellwether failed to create a bullish impulse leg on the lesser charts with its last leap, buttressing the evidence that April's 644 high may endure for a long while.  Bulls and bears have been dueling since, hinting that summer is likely to bring more tedium, not exuberance. If you hold a long-term position, consider selling 'strangles' against it, since they are quite rich. Selling the July 560 put/590 call, for instance, would fetch about $2700, establishing a theoretical profit zone stretching from 537 to 617 for the options portion of the position.

The futures ended the day with an impulsively bullish thrust on the hourly chart that night owls may be able to leverage. The approach called for is perhaps the opposite of a 'timed' buy-stop, since the waiting game will take place before we get long rather than after.  In this case, I'll suggest waiting for a very minor, uptrending abc pattern after 'X' has been triggered relative to the larger pattern shown.  Essentially, along the route of B-C, you will be looking for impulse legs on charts of 3-minute-degree or less.  The later the signal occurs Tuesday night, the more likely your success, since we are always favored when our competitors have grown bored and inattentive to opportunity.  Like to learn how to reduce the risk of a trade using the Hidden Pivot Method? Click here.

New life for bulls seems remote at the moment, since the July contract would have to climb all the way to 31.470 to challenge an 'external' peak on the daily chart. More immediately, the futures remain in a duel that suggests no quick end to the tedium that has characterized price action since mid-May. The somewhat gnarly pattern shown implies that the next thrust could reach 30.605, but the futures will first have to overcome the midpoint resistance at 29.260.  If this Hidden Pivot is surpassed, camouflageurs should seize the advantage by buy-stopping themselves into a long position at the first available 'X' of minor degree on charts of 5-minute degree or lower.

With the exception of June 1's bullish wilding spree, price action during the last month has produced precious little evidence that Gold wants to move higher. That could change overnight, of course, but the burden of proof will remain on bulls for now.  Most immediately, they'll need to leverage yesterday's close above the midpoint resistance of the pattern shown. The breach portends more upside over the near term to its 'D' sibling, 1653.30, at least, but what happens next is what matters.  As always, if a 'D' target -- especially one that will have been two weeks in coming, as this one has -- gives way easily, buyers will have a green light to push this vehicle to the next major Hidden Pivot.  FYI, "next" in context means the 1744.30 midpoint resistance of the daily-chart pattern A=1491.60 (7/1/11), B=1921.50 (9/6/11), and C=1529.30 (5/16/12).

While Fitch’s was prudently downgrading 18 Spanish banks on Tuesday, U.S. stocks were thundering higher, recouping about two-thirds of Monday’s sharp losses. Wall Street’s irrational exuberance aside, news sources around the world seem to be catching on to the fact that rising share prices do not necessarily portend a solution to Europe’s deepening financial crisis. Our favorite headline of the day came from the London Globe and Daily Mail, atop a column written by one Michael Barad: Uh oh, Italy swears it doesn’t need a bailout.  Nothing like a little humor and a dab of cynicism to put things in proper perspective. Elsewhere in the news, even the usually "Ray-rah, economy!" front page of the Wall Street Journal seemed to have noticed that swelling yields for Spanish debt seem to call for an even bolder solution. Rates on the 10-year were at 6.72% Tuesday, up a steep 6.52% from the day before.  This is a euro-era record for Spanish paper, and it makes clear that investors are not willing to suspend their skepticism that a mere $125 billion loan can somehow tide things over for more than a day or two, if that long. In fact, this token sum has bought just a fleeting blip in share prices around the world – a blip powered almost entirely by short-covering bears, not by investors who actually believe Europe is getting a grip on its problems. Granted, that doesn’t explain Tuesday’s 163-point rally in the Dow Industrials two days after-the-fact. But even if the buying continues for another day or two, pushing the broad averages marginally higher, we’ll be looking to get short every good chance we get. Mainly, that will entail buying put options on the QQQs, a proxy for Nasdaq shares; or on SPY, an equity-based vehicle that tracks the