ESZ09

The futures were bound for a Hidden Pivot rally target at 1102.75 early Wednesday evening, having exceeded its midpoint sibling at 1098.25 by a decisive 1.00 point. A minor rally top at that price would hold no particular opportunities for us thereupon, nor does the implied 4.50-point thrust from current levels deserve more than passing attention from those unwilling to cast themselves into the fray of illiquidity, nefarious intentions and general sordidness that characterize night trading.  It would be at exactly 1112.50 that bulls will be signaling their return to limited power, since that would exceed the subtle look-to-the-left peak labeled in the accompanying chart.

In the opening minutes of the session, the futures bottomed within three ticks of the 1087.00 target shown in the chart, then spent the rest of the day chopping their way to nowhere. Bears dominated at the close nonetheless, and we should therefore use a Hidden Pivot at 1078.00 as a minimum downside target once yesterday’s lows are breached. That number will remain viable as long as 1097.50 (aka, point ‘C’) is not exceeded to the upside first.

Some gurus and permabears have already throw in the towel on the possibility of a meaningful decline during the remainder of the year, but let’s not forget that there are some potentially VERY important Hidden Pivot rally targets just a two-day rally above these levels.  I remain confident not only that they will be reached, but that the futures will correct sharply after making contact.  The price action that follows could conceivably become part of a rolling top that carries into next year, but the chance that a major top is in should not be dismissed.  Here are the targets once again, respectively, for the December and March futures:  1138.50 and 1140.00;  and 1127.25 and 1129.50.

I mentioned some VERY important rally targets in the chat room the other day, but here they are officially:  For the December contract, the key Hidden Pivots lie at 1138.50 and 1140.00;  for the March contract, the respective pivots are at 1127.25 and 1129.50.  What is interesting about these sets of numbers is that they do not come from “alternative” points “A”; rather, they are closely coincident targets calculated from patterns of two different magnitudes.  As such, we should expect each target range to exhibit double stopping power. I have included a  weekly chart that shows there were no tricks in deriving the targets. Both come from impulse legs that meet strict criteria, and the only thing that mars their perfection is the lack of a one-off A in early March to begin the larger pattern.

There is little doubt in my mind that these pivots have the potential to end the bear rally begun on March 9, so the question is whether they will be reached at all.  Usually, we categorize an important rally target as unachieved as soon as a near-miss gives way to a bearish impulse leg of hourly-chart degree.  In this case, that would imply a print at 1053.50 following a leg down that is unpaused after exceeding 1073.50. We needn’t wait so long for confirmation, though, since subtler signs of a trend failure are already developing on the lesser intraday charts.  I suggest using today to gather further evidence, which will accumulate as corrective patterns either succeed or fail to reach their ‘D’ targets. The December contract has come within 22 points of the target, but my hunch is that it is capable of getting closer to it — i.e., 1122.00 or higher — before failing.

The 1152.75 target given here earlier is still the only game in town, but it feels as though DaBoyz will need some news to catalyze the short-squeeze that alone is capable of making the rally happen. The midpoint sibling of that number is 1110.25, and so we shouldn’t be surprised to see the futures loitering near that price for as long as it takes to muster sufficient bravado for the next leap.  My hunch is that when it finally happens, perhaps starting with a gap at the opening, the move will prove to have been all but inaccessible to even the most patient bulls.

The futures followed our script yesterday, head-butting 11112 to no avail.  Or perhaps to slight avail, since the action will have weakened resistance ahead of the breakout we’ve known all along was coming.  It is a tired and brutally tiresome rally, moving from one level to the next when short interest has built up sufficiently to goose stocks to a higher plateau.  Between rallies, downside feints have been entirely unpersuasive because institutional buying is the mindset right now, pending whatever horrific news it will take to get the money managers’ minds right. Most immediately, we should look for the next push to take this vehicle as high as 1152.75, a Hidden Pivot that comes from the 120-minute chart. It would get there sooner if Goldman were doing its job, but it looks like the market is about to drag Goldman higher rather than the other way around.

The futures are understandably skittish about taking the celebration to a new level, but they seem equally unable to give up ground with so much bank-system liquidity aggressively seeking refuge. What’s a permabear to do?  It is predictable than any shorts who have hung on for the last eight months will reap maybe three days of pleasure when the stock market finally falls apart. But no one can say exactly when that will happen, and we will need to occupy ourselves in any case as we wait for seasonal exuberance, such as it is, to run its course.  For the moment, expect another head-butt near 1112, since yesterday’s selling did not even reach the 1076.00 midpoint support of the corrective pattern shown in the accompanying chart. _______ UPDATE (1:29 p.m. EST): With 30 minute remaining in the session, the futures were — big surprise here — head-butting 1112. The intraday high so far has been 1111.75, and it was followed by a pullback to 1107.50.  The rally is most surely bullishly impulsive, having surpassed every peak but one (1113.00) going back two weeks.  Expect DaSleazeballs to keep the pressure on shorts Tuesday night.

An ageless target at 1113.00 that served us well early in November has shown more staying power than we might have expected. I hesitate to designate it as the Mother of All Bear-Rally Tops, however, because one can never be entirely certain about such things (even if one can trade them with almost zero risk).  With neutral expectations at the bell on Monday morning, there is no compelling reason to look for camouflage opportunities either up or down. They will be present, to be sure, but it will be no easy task to extract more than a few points of profit from them.  A pattern that I have illustrated in the accompanying chart could develop into something with tradable implications for Sunday night-owls.

Yesterday’s gratuitous swoon was practically the mirror image of  Monday’s equally gratuitous hump. If the futures get squeezed above this tedium, look for a shortable top at  exactly 1121.25. The midpoint sibling of that Hidden Pivot lies at 1108.25, and so a shallow pullback from just above that number — 1109.25 or so — could conceivably be used for a camouflage entry from the long side (see chart).