Wednesday, September 17, 2014

The orgy of greed surrounding Alibaba's impending IPO has already made early backers rich, but will John Q. Public get to share in the lucre? There seems to be little doubt that the company is destined for colossal success.  And yet, there are reasons to doubt that it can operate as honestly and efficiently as such trusted U.S. companies as Amazon and eBay.  In the meantime, it would hardly be farfetched to suggest that a financial event hyped as promiscuously as this one could put a top on the U.S. bull market.  It will be a very difficult act to top, for sure, and that mildly depressing fact could cool the fever on Wall Street for the foreseeable future.

Although today's E-Mini S&P tout sees a move to new record highs as imminent, I have reproduced a long-term chart as a reminder that bulls will be up against a very formidable Hidden Pivot target at these levels.  Specifically, a 1999.00 pivot (adjusted slightly from my earlier tout) that has been 27 years in coming precisely completes a pattern begun from the point 'A' low at 244 recorded at the bottom of the 1987 Crash.  That said, a strong push past the target would put yet another Hidden Pivot in play at 2140.58 that comes from the August 1982 low of 102.42.  How strong a push? My hunch is that a two-day close above 2030 would clear the path to the higher number. _______ UPDATE (10:24 a.m. EDT): A subscriber has suggested using a 216 low for the '87 Crash, and so I will. I vaguely recall that number, even if -- incredibly -- searching a million web pages, I was not able to find it initially.  The new low will give the S&Ps room to run up to as high as 2028 before the target can be considered fulfilled.  I expect it to work very precisely -- i.e., within 3-4 points -- and that is why it is important that we use the actual, exact low for 1987.

Yesterday's short-squeeze on news of 'Chinese QE' was strongly impulsive, even if a surge to new all-time highs is not quite a done deal. Notice on the hourly chart (inset) that the future surpassed an internal peak and two externals without taking a breather. This is the kind of feisty price action that often begets a follow-through rally of equal or even greater strength. Shorts will be edgier than usual, but their nervousness will work to the advantage of traders using 'camouflage' tactics to get aboard. Remember: No matter how frantic and seemingly chaotic the ups and downs, they can be reduced to their tradable rudiments when viewed, simply, as impulse legs.