Thursday, October 9, 2014

The futures have chomped through a midpoint resistance at 1221.80 Wednesday night and presumably are bound for its 'D' sibling at 1238.50. That would refresh the bullish impulsiveness of the hourly chart, but the implication would be still more bullish if 1238.50 fails to restrain the move for long. There are no subtle 'external' peaks immediately above that we can use for a camouflage entry, but you might try the unsubtle one at 1232.70 recorded on 9/26 to get a handhold. A bc-type pullback from just above it could offer a relatively low-risk boarding opportunity.

In Hidden Pivot terms, even on the hourly chart yesterday's rally was insignificant.  Rallies with genuine promise typically exceed two prior peaks before taking a breather; so far, this rally has exceeded none.  That would change, however, with a relatively modest, uncorrected thrust exceeding 1978.25, the second of two peaks needing to be breached to generate a bullish impulse leg on the 60-minute chart. That would put the futures well on track for a move to new record highs. The rally would be tradable, of course -- most efficiently on a pullback from just above 1978.25

Instead of salivating over the possibility that the stock market has already topped, as we so often do, today we'll go strictly by-the-numbers.  This calls for looking at the accompanying chart as though it were a stock we really like, rather than as the sum of brazen falsehoods that have sustained the illusion of economic recovery. On that basis, we are forced to concede that the Dow looks at least somewhat likely to hit a new record peak before a bear market could begin in earnest. The 17622 target is an oldie that should be familiar to those who have followed Rick's Picks for a while.  Although  it was originally offered here as the maximum conceivable extension of the bull market, there is actually a higher target at 19438 that would be in play if the lower is exceeded by as little, perhaps, as 30 points. I've circled the recent selloff to show how insignificant it looks on a long-term chart. While some of us might like to imagine that the several 200-point down days we've seen recently are meaningfully destructive of bullish fantasies, this chart shows that only a very modest correction has indeed occurred, at least so far. Practically speaking, we'll want to short the bejeezus out of any rally that achieves our 17622 target.  We should also try our darndest to be long on the way up, since 628 points of potential profit is not to be sneezed at, even by permabears who like to think they know better. There will be numerous hooks along the way that we can use to get long with relatively little risk. This we can do by jumping on uptrending abc patterns on the lesser intraday charts. A bet on new  all-time highs would become less speculative if and when the

Whatever reservations investors may have had on Tuesday about the dismal drift of the global economy, they turned wantonly ebullient yesterday on the momentous news that the Fed was fixing to do...nothing. Actually, news stories attempting to parse the latest FOMC minutes suggested that internal debate has heated up over the question of when the Masters of the Universe will begin to throttle credit. For our part, we'll stick with the same prediction about this that we've been making for about the last ten years: NEVER. Many investors evidently feel the same way, since they were able to lift the Dow 275 points on Wednesday on word that nothing had changed.  This was the most explosive rally in recent memory, and although nearly all of the buying may have been done by short-covering bears and momentum players, particularly the algos, permabears shouldn't stick their heads in the sand waiting for the fury to subside. For the record, we remain convinced the stock market is in the throes of a major topping process. If there is reason to think it could achieve yet another record high, it stems from the fact that bears are still getting hammered worse than bulls. Yes, there undoubtedly will come a time when bulls will be puking their guts out on declines rather than buying the dips. But for now, it is bears who are in Mr. Market's crosshairs, reluctant as they are to give up on shorting THE top -- and to stay short more or less forever. How high might the broad averages need to go to cause shorts to throw in the towel?  I've dredged up an old DJIA target that may hold the answer.  For details, check out today's tout -- or if you don't subscribe, click here for a free two-week