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.
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ESZ09
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).
Yesterday’s nasty little short squeeze recouped last Thursday’s air pocket, bracketing the intervening day (i.e., Friday) as an altogether gratuitous, and hardly atypical, swoon. The rally was ”camouflaged,” strictly speaking, because it vaulted a bunch of prior peaks without getting past the important one at 1112.25 recorded last Monday. That number was three ticks shy of a 1113.00 Hidden Pivot target we’d been using for too long, and it rounds out a picture that explains in graphical form how a market with zero bullish buying interest can keep going higher, and higher and….higher. I’ve got an 1138.00 rally target we can use if this tedium should continue, but I won’t show you how I derived it because I don’t want to encourage bad habits in my students.
The futures ended the day on a mild upswing, but that does not negate the fact that earlier weakness had penetrated a midpoint support at 1087.25. This implied further downside to 1079.50, exactly four points beneath Friday’s intraday low. The mood could change over the weekend, of course, but we should use 1079.50 as a minimum downside objective as long as the relevant point ‘C’ at 1095.25 is not exceeded to the upside first. If it is, without the 1079.50 target being reached, that would have bullish implications for the near term. _______ UPDATE (12:20 a.m.): Shortly after midnight, the futures were playing chicken with the 1095.25 point ‘C’ noted above, but without having exceeded it. If DaBoyz were really interested in buying stocks, they’d have found a way to manipulate the index futures lower by a few points tonight, not higher. Be that as it may, the buzzards will probably be able to trigger a mini-short squeeze if they can push ES above 1095.25.
The futures had a fabulous chance to fall apart yesterday, since they were weaker than we’ve seem them on any day since Halloween. Instead, on the hourly chart, the weakness could not penetrate even a single prior low “along the wall” of the last rally. This suggests to me that although there is not enough buying power to move the S&Ps to the next rally target (1132.25), there is even less enthusiasm for hard selling. Friday nuttiness could change this dynamic, but bulls needn’t stir from their sleep unless 1102.25 is exceeded. To the downside, 1073.75 is still where trouble begins. There’s a midpoint support on the way down at 1087.75 (D=1080.25), but it looks too close to some prior lows to be of value for bottom-fishing.
After starting the week with a pop to within less than a point of a well-advertised Hidden Pivot at 1113.00, the futures have developed a yellow streak contemplating the next, 1132.25. This is what happens when the dirtballs who run this carny game can no longer move Goldman $10 in a day. If the bank stocks are not leading the market higher, then the market is simply not going higher. It’s as simple as that. Bears looking for a heartening sign should cross their fingers and hope the futures dip below 1074.00 today, since that’s what it would take to turn the hourly chart bearish.
All of you should have noticed by now that the futures are having difficulty mustering a seemly correction after topping two days ago just three ticks from an 1113.00 rally target. This means they want to go higher, of course, and so they will. We should therefore consider the 1132.25 target given here earlier as being in play, and you can trade it however you please. Night owls looking for entree will probably need to zoom down to the one- or three-minute chart to find a pattern subtle enough to yield a low-risk entry opportunity, but please note that all external peaks have been exhausted if you were looking to board with-the-trend.
Yesterday’s 1112.25 high missed my target by less than a point — close enough to consider the 1113.00 target achieved. If and when the future push decisively above it, we should use 1132.25 as a minimum upside objective. More immediately, though, a retracement target at 1103.50 can be used, especially by night owls, to bottom-fish with a stop-loss as tight as three ticks. This target looks like a good one, so if it’s exceeded we might expect sellers to prevail on Tuesday. ______ UPDATE (1 a.m. EST): The futures have traded down to 1101.00, stopping out longs from 1103.50 with minimal damage. This portends more weakness tonight, at least, and perhaps a bit more of it on Tuesday.
An 1113.00 target that should have been easy is taking weeks to achieve, but it remains valid nonetheless. Shorts should risk no more than a 1114.25 stop, but don’t attempt the trade in the final hour, since you want to be out before the close. Friday’s action was just “dueling impulse legs” on the hourly chart, but the futures will have a chance to create a strong impulse leg today with a short push exceeding 1103.25.
At the close, the futures bounced from a low that lay two ticks above a minor Hidden Pivot support at 1082.00. Anything beneath that would portend 1079.00, which can be bottom-fished with a 1079.25 bid and a 1.00-point stop-loss. The trade will remain valid as long as 1091.00, the point ‘C’ of the pattern, has not been exceeded to the upside. Looking at a somewhat bigger picture, the hourly chart would become worrisome (or perhaps encouraging if you are of the bearish persuasion) if the futures dip below 1074.00.
