DJIA

Should I mention that yesterday’s 337-point rally was not impulsive on the larger intraday charts? Check out the 240-minute bars if you don’t believe me. Another measly 31 points would have done the job, but it looks like the panic-stricken shorts who powered yesterday’s wilding spree just didn’t have it in them.  My hunch is that the rally will prove to have been a one-and-a-half-day wonder after bears have done their puking Wednesday morning. Still, because the daily chart actually is impulsively bullish, we’ll have to treat the expected pullback with the same deference today’s commentary has accorded Kim Jong Il.  Allowing for the most bullish scenario I could possible see over the next eight trading days, my maximum rally target would be 12760, subject to midpoint interference at 12248.

The Dow’s failure, after two attempts, to get past the 11717 peak recorded on September 1 is bearish on its face, but technically buyers can keep trying with no penalty as long as the pullbacks don’t ‘go impulsive’ on the hourly chart.  That they would do, albeit only mildly, with a print today below 11326;  however, a feint beneath the 11051 low from a few days earlier would make for a more impressive jolt to the bullish argument.  Notice that yesterday’s selloff doesn’t look so bad on the Indoo’s hourly chart — not that it did on the E-Mini chart either. But rather than speculate on what this might mean, we’ll simply set a screen alert at  11050 to warn of potentially significant trouble.

Yesterday’s 600-point bounce created bullish impulse legs on the lesser intraday charts although — surprisingly — not on the hourly chart (see inset).  I see little value in putting out trading points ahead of whatever wildness obtains on Wednesday. However, a 50% retracement of the plunge from July 22’s peak would put the Dow at 11678, while a 61.8% retracement would imply 11931. We can use the lower number as a minimum upside objective for this dead-cat bounce, but either number can be shorted using camouflage.