Monday, June 3, 2013

The lengthy corrective pattern shown isn't classically pretty, but it does yield a downside target that is acceptable as a maximum theoretical low for the steep decline begun a little more than a month ago. This is a "blended" chart, so we can't rely on the kind of precision we'd need to bottom-fish the 137^18 target with a tight stop-loss. However,  it's good enough for analytical purposes, and for determining whether the Fed still has complete control of long-term yields. In the past, aggressive interventions have typically occurred when the future were close to "maxing out" an important Hidden Pivot target. Although we should expect more of the same this time, we should also be prepared for something different -- i.e., evidence that market forces may finally be exerting a discernible influence.

Index futures and bullion were quiet Sunday night, apparently unable to find an excuse to rally on news that Kim Kardashian and Kanye West are expecting a girl. When stocks open Monday morning we may find out whether Friday's selloff was simply "technical," or whether instead there may concerns sufficient to slow down the rampaging bull. Europe's deepening recession, China's dramatic slowdown, and now a push in long-term yields above 4% that could put the kibosh on the Fed's real estate bubble are indeed developments about which Wall Street ought to be concerned.

In mid-May, I toured the Nevada exploration sites of Rye Patch Gold and came away very impressed.  A forthcoming report will detail my reasons, which include a major lawsuit against Coeur d'Alene Mines that seems very likely to settle in Rye Patch's favor. For now, though, I am initiating technical coverage with the chart shown. The stock topped in April at 46 cents a share, but as you can see, based on Hidden Pivot analysis it is likely to fall to at least 0.2965 if the midpoint support at 0.3296 touched last week is breached.  I hold no current stake but would be an aggressive buyer at the lower price.

No sooner had the futures exceeded the bullish threshold I'd flagged at 1417.10  (1416.50, basis June), setting up a potential buy signal Friday morning, than they retreated into a duel between bears and bulls. No trading signal was tripped, and although bulls still hold a small edge in this fray, it was not exactly a healthy sign that the decline has come without the futures having reached the 1426.00 rally target shown.  We'll await further price action to inform any trades we might consider, but if last Tuesday's low at 1372.80 fails to hold, prospects on the hourly chart would darken. However, it would take a fall beneath 1354.40 to turn it outright bearish.

Friday's final-hour plunge came within a hair of a well-defined target at 15107 on the intraday charts (see inset). My hunch is that follow-through selling on Monday morning (or perhaps Sunday night) will breach this Hidden Pivot support.  Were this to occur, the bearish implications would be the same as if the breach had occurred on Friday. In any event, we'll want to monitor minor upward abc corrections closely, since the failure of any such pattern to achieve or exceed its 'd' targets would be indicative of weakness of higher degree yet to play out.