Monday, December 30, 2013

You can bottom-fish the 1206.40 target with a stop-loss as tight as three ticks if the futures get there, but if you were to try this at the 1208.60 midpoint, 'camouflage'  is advised. Of course, if the futures go no lower than 1208.60, any impulsive rally that produces a shallow pullback from just above 1210.80 (an 'external' peak clearly visible on the 5-minute chart) would offer an excellent opportunity to board a bull move with relatively little risk. ______ UPDATE (3:50 p.m. EST): Sellers crushed the minor supports noted above, implying that bear-market targets of a much larger order are still in play.  My minimum downside objective is therefore 1150.800 (which can be bottom-fished cautiously) and thence 1028.50. Both targets were given here previously.

The futures topped Friday a point from the rally target we'd been using for a week. As noted in an update after-the-fact, getting short and staying short would have been difficult, although it would have been theoretically possible to come away with a profit of perhaps $200 per contract.  The target was a clear one -- clear enough, I should think, to give the rally a day or two's pause.  However, and as I mentioned here on Friday, none of the abc corrections that played out on the very lesser charts reached their 'd' targets.  Instead, they turned from near their respective midpoint pivots, suggesting there are more buyers waiting in the wings.  Accordingly, night owls should trade with a bullish bias Sunday night, although I am hard-press to offer you a target that inspires bold confidence.  The 5-minute chart can be used, whether if bottom-fishing or looking for a promising camouflage set-up.  As of this moment, I'm looking for a tradable bounce from within a tick of the 1834.25 target shown.

The news media appear to have gone 'all-in' hyping the supposed economic recovery.  It's one thing for editorial-room halfwits, eggheads, Guvvamint statisticians and Obama shills to pretend the economy is in fact strengthening. But what are we to make of the bond markets, which have been acting as though they too believe that a powerful recovery has finally taken root?  Judging from the long-term T-Bond chart (see inset), that's what has been happening.  Notice that the continuous futures contract recently generated a powerful down-leg, one that looks strong enough to keep on going. If so, yields are headed significantly higher, presumably because the economy is about to pick up speed. Wouldn't that kill the economically crucial housing recovery, you ask?  Indeed it would -- especially considering that mortgage re-fi business virtually dried up earlier this year in the wake of a relatively modest increase in rates. For us, at least, it's impossible to imagine a broad recovery with the housing sector hitting a wall. A new paradigm, perhaps? We've wondered ourselves whether, five years from now, the real economy -- the one tied to job creation, capital investment and income growth -- will still be a zombie even as the Dow pushes toward 40,000. As preposterous as it sounds, who can be sure? Returning to the technical picture, March T-Bond futures, which move inversely to yields, appear bound for at least 125^07, but to as low as 114^22 if the higher number, a Hidden Pivot support, gives way. If the lower number were to be reached, 30-year yields would be above 4.5%, compared with a current 3.9%, and long-term mortgages would be well north of 5%.  Not exactly a catalyst for real estate inflation. Alternatively, the most likely place for the March T-Bond to turn higher, assuming it is about