Wednesday, October 10, 2012

Is the euro's dead-cat bounce near an end? There are hints of it in the Dollar Index's hourly chart (see inset). Notice how yesterday's fleeting upthrusts marginally exceeded October 1's high, refreshing the bullish impulsiveness of the chart as we should expect if the uptrend is going to continue. Let's use the 80.53 target of the pattern shown as a minimum objective. If it's reached -- or better yet exceeded -- the case for a resumption of the long-term bull trend would strengthen, as would the implication that the euro is finally back on track for a fall to 1.08, my long-term bear-market target.

Zzzzzz. This vehicle is in its fourth consecutive week of soporific price action, offering opportunity as far as we're concerned. To get long speculatively without putting much at risk, traders should monitor the hourly chart for the quiet impulse leg that favors our camouflage approach. Most immediately, that could entail zooming down to the three-minute chart for your entry trigger if GDXJ falls to 23.80, the midpoint support; or all the way to 'd' at 23.42.  Keep in mind that an upturn from the higher number would buttress the possibility that we are seeing, at long last, a breakout from the range of the last several weeks.  _______ UPDATE (October 11, 2:49 EDT): Yesterday's low caught the 23.80 midpoint flagged above to the exact tick.  If you  got long as suggested please let me know via e-mail or in the chat room so that I can establish a tracking position for your further guidance. ________ UPDATE (10:51 a.m. EDT):  In the chat room a subscriber has reported a fill at 23.82, so I'm establishing a 400-share position at that price unless I hear from someone who did worse. For now, take a partial profit by covering half of your original position at a current price of around 24.73. Imputing the theoretical gain to what's left gives us a 200-share position with an effective cost basis of 23.37. Do nothing further for now.

The E-Mini S&Ps are within one selloff of generating the first bearish impulse leg on the daily chart since spring.  For details, check out today's ES tout and the chart that accompanies it.  Meanwhile, evidence mounts that the euro's dead-cat bounce may have ended. See my DXY tout and chart to understand why.

The futures could do some serious real technical damage to the daily chart with another day of  hard selling. An 18-point downdraft, equivalent to about 150 Dow points, is all it would take to breach an internal and external low, generating the first bearish impulse leg we've seen on a chart of this degree since spring. At that point, subsequent price action at the 'p' midpoint support of the developing downtrend would be crucial to our assessment of the bear's power (see inset).