Tuesday, October 23, 2012

Norfolk Southern, a good indicator of the manufacturing sector's health, has languished in purgatory for more than a year after breaking out in July above 2008's record high. The turgid price action since then reflects the anemic nature of our alleged economic recovery. From a Hidden Pivot perspective, the stock is in a duel that looks like a draw at this point. However, it would take a decline of just 6%, to 62.82, to turn the picture impulsively bearish on the weekly chart. Alternatively, nothing less than a 9.3% rise exceeding 73.07 will put bulls back on the offensive.

The ginned-up short-squeeze that ended yesterday's session was undeniably impulsive and may have created an avenue of opportunity for night owls.  The pattern is just lazy-ugly enough to appeal to no one -- no one but us, that is, especially if it generates the kind of single-bar 'C' low we relish. That'll likely be good enough to get point 'x' buyers to the 'p' midpoint, but you'll need to  make sure you take a partial profit there if it becomes available, since breakouts in the wee hours have been relatively rare recently. _______ UPDATE (11:11 a.m. EDT):  The futures sank without signaling any buying opportunities of the kind we look for.  They've traded as low today as 1402.00, but more downside to 1390.25, the nearest Hidden Pivot support, appears likely.

Apple blew past minor pivots yesterday like an armor-piercing projectile, implying buyers are eager for more. They put a bullishly impulsive finishing stroke on the day's final bar (see inset), peaking within a cluster of 'external' peaks from last Thursday that could prove useful to camouflageurs.  A buying opportunity might look something like the one I've sketched. Please note that you may need to trade off a 24-hour chart with night bars to take advantage of such a development, and that night bars can often be flukey.  ________ UPDATE (11:03 a.m. EDT):  The Dow Average, down 236 points at the moment, is the tug-of-war winner today. It has dragged Apple $7 lower, but the stock is nonetheless showing resilience -- so far by going no lower than a 'p' midpoint support of a minor corrective pattern (5m, a=635.38, b=623.52).  The midpoint lies at 623.85, just 5 cents beneath the so-far intraday low, but if it's breached, expect the stock to continue falling to at least 617.92, the midpoint's 'D' sibling. Click here for a free trial subscription that will allow you to join the fun in real time.

[Apple shares are up $27 since this commentary went out early Monday morning. However, there was no sign that  it was having a positive effect on the stock market, since the Dow Industrials were down for most of the session and closed unchanged.  I doubt this divergence can continue for long, so either Apple returns to earth or the broad averages start showing some of that old irrational exuberance. RA] A ZeroHedge reader who goes by the handle "Kito” took me to task last week for straddling the fence. On the one hand, he observed, I have been predicting a huge Dow rally to 14969. More recently, though, in a commentary published last week and rightly seized on by Kito, I said to hell with the bullish target; with Apple, IBM and Google shares getting bludgeoned, it’s only a matter of time before the bloodshed spreads to the broad averages. So which is it, Kito has asked? Am I bullish or bearish? I dodged his question, suggesting that he “ask around the neighborhood” about my track record as a forecaster.  This was disingenuous, since it implicitly asked him to excuse my waffling merely because my subscribers would likely attest to the accuracy of my forecasts in the past. As we know, however, in the forecasting business a guru is no better than his last prediction.  With Kito’s criticism in mind, as well as the best interests of my subscribers, I’m getting off the fence this morning to offer as clear a forecast as I can  -- one that I hope will be illuminating and useful to all. Let me first say that no chartist possesses a crystal ball. Technical analysis cannot divine the future; it can only help, if combined with horse sense, in estimating the odds of various speculative