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DJIA
The weekly chart shows how yesterday’s plunge created a bearish impulse leg by exceeding the required internal and external lows. The price bar itself doesn’t look like much in the context of this very big picture, but it is ominous nonetheless that it has followed a bull cycle that failed to surpass the 13187 peak from May 2008. By definition, that means the entire Mother of All Bear Rallies from the 2009 low is merely corrective relative to that peak. The resulting, bearish ABCD pattern gives us a Hidden Pivot midpoint to use for a minimum downside target: 9542, representing a further fall of about 16 percent. To be sure, there are lesser uptrends yet to play out against the larger, bearish tableau; however, we now have an especially compelling reason to look for ways to get short at their respective midpoints and ‘d’ targets. Camouflage, anyone?
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I’ve alluded in today’s commentary to a 13182 target, but this chart shows its provenance in greater detail. Notice that the 12523 midpoint pivot, which is about as high as I think the Indoos could actually get, lies somewhat shy of May 31’s mini-Matterhorn at 12574. However, if a thrust were to exceed that last number, as well as the 12633 peak just to the left of it, that would all but clinch the move to 13182, notwithstanding the daunting resistance of early May’s 12875 peak.
The Indoos’ last big upthrust missed a 13017 target by 141 points (see inset), but the failure was understandable, given the imposing presence of May 2008’s structural resistance at 13137. The subsequent pullback has homed in on the 12286 midpoint pivot, and we shouldn’t be surprised if the Dow finds a groove oscillating around that number for the next few weeks. A weekly close above it would be reason to look for camouflage entry opportunities on the intraday charts.
Although Monday’s tout for the E-Mini S&Ps implies a fall of about 200 points in the Dow, the DJIA’s chart itself suggests it could be significantly worse. I’ve flagged a pattern that projects to at least 11633, exactly 319 points below Friday’s settlement price. The midpoint support here lies at 11908, so if the Indoos open a mere 44 points lower on Monday, they will be on thin ice, vulnerable to a further fall of 275 points. Please note that the pattern itself is a good one, with single-bar price points at all three coordinates and a point ‘B’ that has properly exceeded an important prior low. Those factors lend a high degree of confidence to the target itself.
The thimble-rigging, conniving spook-job exposed by yesterday’s giddy opening bar failed to get it past Monday’s 12643 high, adding to the suspicion that buying interest is nil, even among erstwhile panicky shorts. Since there is even less interest in selling, however, we should expect DaBoyz to continue to hold this gas-bag aloft until the next crumb of short-squeezable “news” hits the tape. Bears are advised to continue hibernating peacefully unless 12719 is exceeded to the upside. If you’re curious as to why but don’t subscribe, click here to access all of Rick’s Picks features and services free for a week. This includes access to a 24/7 chat room that draws combat-hardened traders from all over the world.
Although today’s E-Mini S&P forecast predicts lower prices, a cursory look at the Dow’s hourly chart obliges us to give the begrudging benefit of the doubt to bulls, since almost no technical damage has resulted from the scuddling price action of the last two weeks. Bulls would regain control on a thrust today exceeding 12810, but otherwise we should presume the correction has at least a little ways to go, to a minimum 12461, or possibly to 12427 if any lower.
Friday’s low came within four ticks of a calculated low (see chart), so perhaps we should dogtail the Dow for a while as long as it’s being so cooperative. The blue chip average looked bound for at least 12356 at the close yesterday, although that Hidden Pivot’s dubious, sausage-y pedigree makes it unsuitable for shorting.
Technical considerations aside, the Indoos look like they are getting ready to blast off for the relatively short thrust it would take to achieve new recovery highs and extend the Mother of All Bear Rallies into its 26th month. Looking at the chart, the impending “liftoff” is so palpable, in fact, that we should view it with every ounce of contrarian skepticism we possess. Practically speaking, this means we’ll be looking to get short — via camouflage, if possible – at any Hidden Pivot worthy of the name. Stay tuned!
