Dow Industrials

Fighting the Fed is one thing. But fighting a global monetary blowout? Forget it. The financial system is so glutted with virtual dollars these days that U.S. stocks would probably hold their ground even if nuclear war were to erupt. Although Friday’s news admittedly fell shy of that threshold, we might have expected a little more deference on Wall Street toward news that Standard & Poor’s had downgraded the credit of France and Austria. Granted, this could have shocked no one, since France had all but begged its comeuppance by pretending to be Germany’s co-equal in the ongoing eurobailout dog-and-pony show. Still, we had come to expect share prices to at least defer perfunctorily to such news, since prop-desk traders typically knee-jerk in whichever direction they expect their algorithm-driven, bipolar colleagues’ knees to jerk. Thus, when the news is ostensibly bad, as was the case on Friday, it’s supposed to cause institutional money to flow out of stocks, much as it flowed out of Carnival shares after one of its liners ran disastrously aground Friday off Italy’s coast. Not this time, though. With Europe once again inching toward a supranational bankruptcy, the Dow fell a ho-hummy 49 points. This seemed especially unusual, if not to say unseemly, given that U.S. markets would be closed on Monday for the Martin Luther King holiday. Under the circumstances, we might have expected traders to take the precaution of fully discounting the scary euroheadlines that were certain to come over the weekend. As indeed they did. Even the Wall Street Journal, a reliable cheerleader for the pathetic, crackpot idea that massive new sums of ginned-up money can “save” Europe, weighed in with some uncharacteristically grim assessments. Gold, for its part, rose moderately, perhaps because the bullion bankers and their friends in very high places

As we went to press Monday night, February Gold was fixing to stop out a bullish position we’d advised that produced explosive, although perhaps fleeting, gains. For subscribers who acted on the initial recommendation made here last week, there was a theoretical profit of nearly $6000 per contract at recent highs near $1767. (Click here for a free pass to our daily recommendations and forecasts.)  But because we had resolved to stick with this bullish play and swing for the fences, we watched passively as bullion quotes receded back into the by-now-familiar muck of uncertainty. To be sure, our position will survive if the futures trade no lower than 1716.20. But we’re not counting on it.  And if gold were to trigger the stop-loss and continue south, the next place we might consider bottom-fishing would be near 1702.60, a “Hidden Pivot” support determined by our proprietary forecasting method. Would such a move portend corresponding weakness in the broad averages? It seems logical, since stocks and bullion have been moving in tandem, if not in lock-step, for months.  Most recently, however, shares have acted far stronger than bullion, suggesting the two might be decoupling. We doubt it, though. More likely, in our estimation, is that the 1000-point rally in the Dow since last Monday is about to reverse and take the precious-metals complex with it, at least for a spell. The rally, after all, was based on optimism over Europe’s latest bailout nostrums and on strong retail figures thus far for the holiday shopping season, but we don’t see either affecting a big picture that remains bleak. No Crystal Ball Even so, because we employ charts and not a crystal ball, we remain open to the possibility that the Dow has more upside potential over the near term. We gave the

We have our doubts that bullion prices are about to embark on a major rally, since yesterday’s admittedly encouraging upthrust was tied to a stock-market rampage that, having occurred for all of the wrong reasons, is doomed to fail.  It was in fact a quite nasty bear squeeze that sent stocks soaring overnight. The short-covering panic was triggered by rumors -- later denied – that Italy was about to receive an $800 billion bailout.  There were also some news stories over the weekend suggesting that Americans had done their patriotic best to kick off the holiday shopping season with a bang. These two news items, even without confirmation of Italy’s rescue, caused index futures to leap wildly higher Sunday night, all but guaranteeing that the Dow Industrials would open up at least 200 points on Monday morning. This they did, achieving an intraday peak 330 points above Friday’s settlement. Would-be stock traders found themselves choking on dust Monday morning, however, since the gap-up opening left no opportunity to get onboard. Even so, via actionable advice disseminated Sunday night, Rick’s Picks subscribers could have caught a profitable ride in Comex December Gold. Here’s the trading “tout” exactly as it went out at around 8:30 p.m.: Europe's latest bailout, this time for Italy, has goosed the futures into a steep climb. Use 1712.50 as a minimum upside target for now, keeping in mind that anything above that would suggest that plenty of buying power remains to be spent.  For camouflage purposes, you can try getting long if, on the 15-minute charts, the futures create an A-B impulse leg by exceeding the 1708.90 peak from last Wednesday without taking out the more obvious one at 1710.80.  This was occurring as we went to press. ‘Camouflage’ Trading Ultimately, we exited the trade with a

We view yesterday’s stock-market plunge as unrelated to the failure of the not-so-Supercommittee to compromise on a paltry $1.2 trillion in budget cuts over ten years. No one expected a deal in the first place, and even if there had been one, its effect on the economy, let alone on the deficit, would have been negligible. Who would ever have believed even a decade ago that a “mere” trillion dollars in Federal outlays would hardly be worth arguing about? Still, the way stocks fell, one might have inferred investors actually cared about the outcome. The nightly news pretended it mattered, perhaps because there were no titillating alternatives to serve up on a slow-news day. Wall Street did its patriotic bit as well, feigning concern by sending the Dow Industrials 250 points lower. In fact, there was bound to be a little knee-jerk selling by institutional traders fearful that their competitors would be selling “on the news.” In our view, markets are driven higher, lower, and sometimes nowhere by mysterious cyclical forces that we will never quite understand. Moreover, it is the cyclically driven price swings that color our perceptions of the news, not the other way around. Trumped-up headlines aside, one thing likely to send a wave of genuine fear through Wall Street is the impending failure of Europe’s deadbeats to get Germany to bail them out.  And, make no mistake, it is only Germany that could be imagined big enough to pass itself off as a credible savior for all of Europe. France is usually treated as Germany’s co-equal in bailout discussions, but in fact France is not a significantly better credit risk than Italy or Spain at this point. Under the circumstances, the unelected bureaucrats who purport to manage Europe’s affairs are hoping to gain support for a

While we amuse ourselves with the entertaining notion that all of the price swings since early August have effected a bearish distribution of stocks, we  should also allow for another, seemingly surreal possibility. Check out today's tout for the Dow Industrials if you want to see just what it might be.

Take a look at the chart below if you think yesterday’s monster short-squeeze meant something. The Dow Industrials were up 326 points at their apex, making plenty of noise but signifying little or nothing.  Some saw the buying spree as a bet that everything will turn out all right for Europe. Yeah, sure. And Obama’s “jobs program” will turn the U.S. economy into the muscular dynamo it was in the 1950s. In actuality, Wall Street’s latest buying riot was simply one more ‘up’ in a tedious series of ups and downs that are being used by the Masters of the Universe to distribute stocks to widows and pensioners before They pull the plug.  The usual bunch of rascals and thieves timed this dog-and-pony show so that it was nearly impossible for anyone to make more than chump change after stocks opened in New York. The big money had already been made overnight on index futures that closely tracked similarly meaningless effusions in Europe and Asia. The rally was of course the mirror image of last week’s hellish collapse (see chart below), which, like Monday’s spasm, was all but spent before traders who keep New York hours had downed their first cup of coffee. These pointless, machine-driven panic attacks are managed so that only a small handful of traders can make money on them.  However, a bigger picture of gratuitous swings that have been occurring since early August explains why long-term bulls and bears alike have effectively been prevented from profiting.  What bear who was short when the week began could possibly have withstood the fright-mask lunge of the last two days?  And what bull could have held steady when the Dow plummeted an even more frightening 950 points last week in just three days? Not that the markets are even

Applying Hidden Pivot analysis dispassionately to the Dow Industrials' monthly chart reveals that this summer's carnage could conceivably be just a correction rather than the resumption of the Mother of All Bear Markets.  As the chart shows all too clearly, the current selloff has merely created "dueling" impulse legs on the long-term chart, with bulls still holding a slight edge when the power of the offsetting bull and bear impulse legs is compared.

Pity the Wall Street Journal for having to gin up an explanation each day for whatever it is that the stock market did the previous day. We reflected on the difficulty of this task, and its inherent futility (and silliness), while discarding a stack of old newspapers yesterday morning. Markets Show Relief, for Now was the above-the-fold headline that greeted subscribers on Monday’s Money and Investing page.  And just how had this show of relief manifested itself? In fact, the steep fall of the broad averages had moderated somewhat on Friday, allowing the Dow Industrials to close down less than a hundred points. Moreover, on Sunday night there was evidence of a strong rally globally ahead of the powerful surge that was to occur in U.S. markets the following morning. Sunday night’s news had concerned the debt-limit deal just approved by the House of Representatives. We had anticipated the stock market’s rally on the news, but also the rally’s immediate failure, in the following trading alert disseminated to subscribers Sunday night. It was headlined, “Watch for a Bull Trap”:  “If a political deal is barfed up before Monday’s night’s supposed deadline, stocks will have nowhere to go but up.  This will not be because traders think the deal is bullish for the market or the economy, but because they expect other traders to react as though it were.  Since nothing could be further from the truth, we should expect the rally to be over rather quickly.  My hunch is that it would be a good short sale with the Dow up between 100-120 points…” And so it went.  Any bull who bought Monday’s opening bar was quickly trapped by a hellacious selloff that was still in progress as we went to press Wednesday afternoon.  The Wall Street Journal was of

U.S. stocks fared somewhat worse than we’d expected on Monday, although the moderate weakness that occurred was a far cry from the collapse a hysterical news media had prepared us for.  Index futures got hit hard Sunday night, to be sure, but it was the kind of stage-managed weakness that occurs nearly every Sunday night. Typically, professional traders take advantage of whatever mood swings weekend news stories have stirred up. In this case, the nervous Nellies were primed to dump stocks at fire-sale prices, stampeded by a scare-mongering press that would have us believe the global financial system will unravel if Democrats and Republican’s can’t work things out.  On Friday, Mr. Obama planted the seeds of fear in the Mainstream Media’s tapioca-filled head, alluding to the possibility that the stock market would punish House Speaker Boehner for walking out on him. The major news outlets eagerly bought into this claptrap, and their fearful drumbeat grew louder and louder as the weekend wore on. By early Sunday evening, when index futures began to trade, widows and pensioners were sufficiently panic-stricken that they became the patsies of Murphy Men eager to fade their action. The Sunday-night crew has traditionally run off-hours sessions like a carnival midway, and they lost no time taking shares down to levels where buyers faced little risk. The E-Mini S&Ps plummeted the equivalent of 150 Dow points moments after trading began at 6:15 p.m. EDT.  That turned out to be the worst of the selling, much as we had anticipated, and stocks moved steadily higher for the next 19 hours.  We’d warned subscribers of a Sunday-night trap in the following note disseminated two hours before trading started:  “Securities markets were set to open Sunday night with no U.S. debt deal in place to calm investors.  This is the