Thursday, May 9, 2013

Sellers have driven the futures below an external low on the daily chart, implying that the Aussie dollar is headed for parity with the greenback.  There is no impulse leg on the daily chart, however, since a proper point B does not yet exist. However, if whatever C-D follow-through leg awaits (see inset) breaches the still unformed midpoint support, it could portend slippage beneath the 1.00 threshold.

The pattern shown speaks with such authority that we should be wary of putting its 18.62 target entirely out of mind. What makes it so compelling is the un-sausagey point B, which by definition exceeded the key external low at 26.950.  Concerning a reprieve, I'd view an impulsive upthrust exceeding 24.900, an April 15 peak 'along the wall' as speculative evidence that bulls are capable of turning the tide.  Traders will find 'external' peaks galore for camouflage entries on the hourly chart, but at the moment, this chart shows only a tedious stalemate between bulls and bears.

A query from Doug Behnfield concerning the placement of stops prompted me to take a look at Tesla's charts. Like a few other stocks that have benefitted from a still-speculative, bullish change in their “story”  --Facebook and Best Buy come to mind – TSLA launched into a parabola that very quickly discounted the best of all possible worlds. Tuesday’s high overshot, by a marginal 17 cents, a 62.20 rally target (see inset) that had been nine days in coming. I’d have advised some covered writes up there if  I'd been tracking TSLA at the time. The correction since is ‘impulsively’ bearish, but it should reverse from exactly 55.46 if Tesla is about to get revved up for another charge. However, a two-day close below 55.46, or an intraday print more than 25 cents below it, would imply more downside to at least 52.72 -- and also an end to TSLA mania.  From that point forward, a more measured consolidation near, in and around 52.72 would be likely. ________ UPDATE (10:55 a.m. EDT): This morning's quite vicious short-squeeze -- we'll assume it was a blowoff -- has come from a low at 55.71 that lay just 25 cents from the midpoint Hidden Pivot noted above.  I don't know how many cars Tesla will need to sell to vindicate the $70.48 peak of this morning's hysteria, but it seems a good bet that that threshold won't be reached for many years.  _______ UPDATE (1:34 p.m.):  The short squeeze has gotten second wind and targets 96.08.  A two-day close above that number would indicate...128.46. _______ UPDATE: I'm revising those targets significantly downward to, respectively, 86.72 and 104.44, since the original numbers appear to have been erroneous.

Permabears who have waited patiently for The Mother of All Corrections should take encouragement from the blithe demeanor of yesterday’s 87-point rally in the Dow. It left the Indoos sitting above 15,000 for the first time and the network anchors oohing and aahing as though they understood what it means. Our take is that the little guy has not only returned, but that he is ready to party. And what better signal could there be that the end is nigh?  With yields on fixed-incomes at historical lows, there was nowhere else to go for the mullet-topped investor with a small wad of cash. Nor can you blame him for taking the plunge so belatedly, even if out of frustration. After all, the blue chip average had gained nearly 130% percent since March 2009 without a single correction worthy of the name. Now, for most investors, the stock market has become the only game in town, even as the supposedly smart money levers up real estate in Phoenix, Tampa, Las Vegas and other by-now giddy redoubts of America’s induced housing recovery . Will John Q. Public’s desperate scramble for yields end badly? Of course it will. Any bull market that takes its inspiration solely from a government-sponsored housing bubble and fraudulent employment data is surely headed for trouble. But for the time being, at least, the individual investor can enjoy the H.M.S. Titanic’s amenities as it plows through a darkening economic tide at full steam. Yellow Flags Everywhere From a technical standpoint, but also a contrarian one, we see yellow flags all over the place. For at these heights, Mr. Market has a commanding opportunity to spring the Mother of All Bull Traps.  Accordingly, we have prepared subscribers for an imminent top in the broad averages, advising them to lay out