August 2009

The 941.70 downside target given here earlier is still valid, but a run-up exceeding 956.00 would turn the very lesser charts bullish again. With the futures currently buoyant at 8:35 p.m. and trading just off a 950.50 high, my immediate objective is 951.10.  If that Hidden Pivot is brushed aside, it would be a bullish sign for the very near-term. ______UPDATE (10:28 a.m.):  The futures bottomed overnight at 842.10, exactly 40 cents from the target. The fact that it was not quite reached is bullish for the near term.

If the futures close above 1.4322 without having dipped below 1.4104, that would suggest bulls are in control.  There is nothing on the hourly chart that promises gainful bottom-fishing at the moment.

Prechter's bullish call on the dollar was all over  the Web yesterday, based mainly on the kind of sentiment indicators from which one might reasonably infer that just about everyone is bearish on the buck right now. Since Bob Hoye is one of the few exceptions, it behooves us to pay close attention to the charts. My gut feeling is that the rally is a bit too pat to be the real McCoy, coming as it did off a low that slightly exceeded mid-December's key bottom at 77.69. What this suggests is that the thrust has been more short-squeeze than anything else -- but not, it should be emphasized, a very powerful one.  In any event, we'll use _____ as a bullish trigger for today and Thursday. The number was given here yesterday and represents a look-to-the-left peak recorded July 15 on the way down.

The futures failed to leverage the previous day's push, fizzling out two ticks shy of a Hidden Pivot midpoint that had been flagged in yesterday's analysis. However, the selloff did no damage whatsoever to the hourly chart, and it would take a _____ print to turn bearish. That's a tick beneath a low made on the way up on August 3.  There are no appealing trades to recommend, not even for night owls, since yesterday's low merely tested a visually obvious support from August 7.

Silver is vulnerable to a mild selloff if it breaches the Hidden Pivot midpoint support at _____ shown in the chart. Its 'D' sibling lies at _____, so that would become our minimum downside objective. Alternatively, we'd need to see an upthrust past _____ to turn the hourly chart bullish, and a close above ____ to get a running start on minor target at _____.

(Here's the latest dispatch from our friend and colleague Larry Amernick, who thinks any stock-market corrections in the offing are going to be shallow.  If you'd like to sample his work, e-mail him at: Amernick@comcast.net.) Time for some straight talk about the stock market, since nothing has improved fundamentally. Congress has passed no financial reform, the Federal Reserve is financing a new equities bubble on Wall Street, and the real economy is on life support. According to our technical runes, the market is overbought but unlikely to correct more than 7 percent any time soon. Below is a daily chart of the SP-500 showing the overbought condition.  The upper window contains my proprietary Overbought/Oversold Indicator, which peaked on July 28. Below that is the percentage of stocks over their 200-day moving average. This reached an overbought reading of 89.01. As the SP-500 approached an overbought condition, investor sentiment has turned euphoric. The upper window in the chart above contains my proprietary market sentiment indicator. The indicator shows that sentiment has moved from panic (last October) to near euphoric conditions. P/E Ratio of 148 And here's something for all of you market-watchers who care about fundamentals: The current trailing Price/Earnings ratio of the SP-500 is 148.47! If current earnings of $6.86 were to increase fourfold by Q4 2009,  that would leave the earnings at $27.44 and the PE of the SP 500 at Friday's close (1010.48) at 36.83. The 48% rally since March 6 has already priced in 2009's earning's growth. The market rally has been fueled by the vapors of Fed liquidity. That liquidity will slowly disappear during Q2 and Q4 of 2009.  Already, the six-month rate-of-change in the Monetary Base is -2.7%, and the six-month rate-of-change of M3 is  -3.66%. The Fed is slowly moving toward a more restrictive monetary

On the weekly chart, we should take note of the fact that this bounce has come off a low just a hair from the 77.20 midpoint shown in the chart. Its breach would send DXY plummeting to as  low as 72.93, but a print exceeding 79.78 to the upside would imply a reprieve, at least.

Our 'Goldman indicator' is flashing yellow, so let's keep a close eye on the 157.01 threshold where things could start to turn ugly.

A push past a midpoint resistance at 9370 would imply more upside to at least 9486, a Hidden Pivot that could be shorted with a very tight stop-loss.