We’ll need to see how things unfold over the next few days to determine whether there’s another shoe to drop. In the meantime, take a mental snapshot of the hypothetical price action I’ve sketched on the hourly chart, since it imagines a couple of Hidden Pivot midpoints that might form roughly as shown. There are no high-confidence targets for today, just a 10633 midpoint resistance from the one-minute chart that lies slightly above yesterday’s recovery high.
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Yesterday’s price action was so sloppy that it may need a good, clean head-fake today to complete what looks like a nasty distribution. I’ll suggest shorting into the rally, but it remains to be seen whether this can be done at the c-d midpoint of a minor uptrend. My preference would be to look for camouflage on a downtrending abc, since shorts are likely to be more nervous than usual with volatility running so high this week. If the Indoos simply head lower, use a midpoint pivot at 10768 for potentially tradable support. ______ UPDATE (11:21 a.m. EDT): By cracking the midpoint support by a decisive 15 points (so far), the Dow has generated a new minimum downside target at 10589. Sayonara, all you bulls!
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The Dow sliced through a midpoint support at 11012 yesterday with no discernible pause even on the 15-minute chart. This implies further slippage to 10914, the support’s ‘D’ sibling. Shorts should be considered on a bounce to 11012, but if you decide to jump in, use the lesser charts for locating a minor-rally Hidden Pivot or a downtrending ‘X’. If trading the futures, you can bottom-fish at 10858, stop 10851. ______ UPDATE: A gap up to 11039 on the opening bar didn’t give us much opportunity to get in trouble. Subsequent action was pretty wild, suggesting that traders don’t know quite what to make of Europe’s troubles. But price movement was up nonetheless — business as usual, perhaps, with an irresistable tide of OPM driving stocks higher no matter what the news or its implications.
On the daily chart, a succession of lows beginning with last July’s 8087 has given us a series of corresponding rally targets all the way up. The next projects a potentially tradable top at 11312.06 (A=92953 on September 3, 2009), although the point ‘A’ low associated with it doesn’t look substantial enough to produce a major top. The maximum high one can project using the same vantage point is 12471.68, a Hidden Pivot that we will want to short aggressively if and when it is achieved. The midpoint pivot associated with that number held up for all of two days, hinting of strong buying power beneath the surface. _______ UPDATE (12:45 p.m. EDT): In the chat room last night and today, “Emerald” homed in on an 11254 target that nailed the so-far high, 11258.01. The pullback has since gone as low as 11222, so partial profit-taking was in order for anyone who shorted the top. My advice in the chat room was to use the Diamonds to get short, but the same advice would apply.
Top 10 Reasons Why Yesterday’s High May Have Marked an Important Top:
1. It fell less than two points from a clear midpoint pivot on the long-term chart.
Reasons 2 through 10: See reason #1. The actual pivot referenced above lies at 11156.37, versus an actual high yesterday of 11154.55. This is surely close enough to merit our rapt attention, even if it means we won’t get to short the exact high. And of course, if further evidence corroborates the significance of this midpoint, we must also be willing to accept that a decisive move above it would portend more upside to as high as 12477, the midpoint’s ‘D’ sibling. I did not spot this development right away because the C-D leg thus far doesn’t look like it’s even close to equaling half of the A-B leg. An optical illusion, it would seem. (Note: The 11156 target was first broached here a month ago in a Diamonds trading recommendation that was later canceled.)
Steel yourself for the news media’s inevitable drum roll-and-kazoo tribute when the Dow closes above 11000 for the first time in more than a year-and-a-half. The exact number to expect — a shortable, potential top at exactly 11077.17 – is a Hidden Pivot derived from a pattern similar to the one that produced the 1196.50 target in the E-Mini S&P. It is a resistance of only middling importance, and although it could ultimately prove to be something more than that, this opportunity should not be considered a bet-the-ranch proposition. _______ UPDATE: The trade was a non-starter, strictly speaking, since the first tradable selloff , a 38-pointer, came just after an 11075 high — two points below our short offer. Next likely stop, according to our Hidden Pivot runes: 11,163.92.
A Hidden Pivot resistance at 11135 is equivalent to the 1197.50 rally target proffered in today’s E-Mini S&P tout. We can use it as a minimum upside projection for the near term, but please note as well that a print below 10765 would turn the hourly chat decisively bearish.
Let’s add the Dow Industrials to the list of major stock indices that we would like to short. This can be done using a midpoint pivot of 111.50 from the weekly Diamonds chart. We recommend selling at 111.37 with a stop at 111.77, risking $40 per 100 shares traded. The equivalent of the pivot in the June Dow futures contract is estimated to be 11087. (Posted by Doug McLagan) ________ UPDATE (2:40 a.m. EST, March 31): In reconsidering the risk/reward characteristics of this trade, we have decided to cancel the recommendation. Should the target be reached, however, traders should be alert to hidden pivot-based opportunities to get short if a reversal there appears to be underway. For the Dow Jones Industrial Average, the midpoint is at 11156.44.
| 11156.440 |
The Indoos are wafting effortlessly above a midpoint resistance at 10771 (60m chart, A=10641 on March 16), implying that a finishing stroke to its ‘D’ sibling at 10835 is imminent. That would put the Dow up just 64 points on Friday before a stall becomes likely. Plan on shorting there using the Diamonds or the June Mini-Dow with a very tight stop-loss. If you choose the latter, a Hidden Pivot at 10790 is equivalent to the one given above for the DJIA. _______ UPDATE (12:11 p.m. EST): The Dow and related vehicles head-faked on the opening, recording highs that fell somewhat shy of our short offers.
