March 2010

The futures exceeded a high-confidence rally target at 1137.25 that we've been using for a while -- but not by enough to stop us out of the short I'd advised from that price.  (The stop-loss suggested was at 1139.25; the actual high was 1138.75.)  The position is holding so far Sunday night, but we'll monitor it closely and stick with the original stop, since it is always more dangerous to initiate a trade on the close -- especially on a Friday -- than earlier in the day.  A move above the target would ordinarily be warning of more strength to come.  In this instance, however, any such strength could be short-lived, since its sole source would be short-covering resulting from the relatively shallow pullback from Friday's high. If the little sonofabitch should break loose, though, brace for more upside to at least 1156.50.  That's a Hidden Pivot that should be shorted aggressively and with a stop-loss as tight as 1158.25.

The daily chart of the Euro futures gives us a sense of how far the euro might react in either direction to the non-farm payrolls report, which often sends markets scurrying one way or the other, or both.  One of the two patterns in question began more than a month ago with a compact but significant impulse wave that surpassed three prior lows back in the middle of 2009.  This D target is at 1.3398, and although the euro's recent decline affords other, lower pivots, let's take them one at a time.  The highest hidden pivot that recent trading can give us is at 1.3854, which will be in effect so long as 1.3550 holds.

An impressive selloff in the yen suggests that the recent uptrend has reversed.  The futures have come within one pip of a midpoint pivot  at 1.1187 and are trading nearby as we write.  If that level does not hold, the sibling D target at 1.1128 will be the next objective.  You could bottom-fish that number with a stop-loss as tight as 4-5 ticks.  ______ UPDATE:  The futures crashed both supports, making the suggested five-tick stop-loss unmanageable unless you were either very nimble or lucky.  Now, the futures appear bound for a test of structural support near 1.0860.

...or some pale imitation of them, perhaps.  The most exciting thing we have on the agenda today is the continuation of the funereal rally that has promised to deliver 1137.25 eventually in the E-Mini S&Ps.

Offer the round lot of stock we acquired for 44.95 at 46.11 to close. That's two cents below a somewhat muddy but nonetheless serviceable Hidden Pivot target.  If the order fills we'll still hold seven April 42 puts for an average 1.05 and a March 44 put for 0.23. ______ UPDATE:  We sold the stock on the opening, realizing a $116 trading gain. Imputing the profit to the April 42 puts will reduce their cost basis to 0.89.  No further action is suggested at this time.

Yesterday's rally may have seemed feisty, but it was actually no more than a gratuitous swing up to the approximate midpoint of the tedious range that has contained the Dollar Index for the last month. Is it distribution, or consolidation?  So far, it looks mildly like the latter, although the impulse leg that makes this so was subtle in that it failed to surpass a key high at 81.47 recorded last June.  It did exceed the required "internal" and "external" peaks, however, lending a camouflage quality to the rally as it appears on the weekly chart. Even so, the weekly chart cries out for more corrective action to create a nice, clean 'C' low for a launching pad.  If things play out that way, the most compelling rally target I am able to identify is the 83.33 midpoint of the pattern shown in the chart.

We should make yesterday's hesitation at 1144.50 our little secret, since the event, which we had predicted precisely, could conceivably provide us with some very useful intelligence in the future concerning Gold's underlying mood. If we were to interpret the pause at this Hidden Pivot  midpoint strictly by-the-book, we could not say yet with confidence whether the highs near the pivot will prove to be the top for gold for the next ten years, or the next ten hours; or whether instead the price of gold is about to embark on a thousand-point rally. What we do know, however, is that if and when the April futures blow past 1144.50,they will become an odds-on  bet to cruise up to at least 1244.50, the 'D' target sibling of our so-far stubborn midpoint. And here is something else we might "know" very shortly:  In the ABC pattern that governs our current analysis (see chart), it has taken April Gold four-and-a-half months to reach the 1144.50 midpoint. That's a long time, and so we shouldn't expect the midpoint to give way in a mere day or two. If  give way it does, however, we would have good reason to infer that the rally is quite powerful -- i.e., well capable of getting to 1244.50  more quickly than we or perhaps anyone but Jim Sinclair might have imagined. This doesn't exactly square with the weak-euro story that now enjoys -- if you'll pardon the expression -- currency in financial circles, but then, that's why we use charts; otherwise, one could blow out all the circuits in one's brain trying to parse the logic of "weak" and "strong" currencies (or the ups and downs of T-Bonds, for that matter).

Absent real buying interest or even much of the artificial kind that comes from short covering, the futures have managed to plod higher nonetheless, magnetically drawn toward a compelling target we've been using at 1137.25. On Thursday, the pullback we might have used to buy on a dip did not quite make it down to our bid, which had been placed at a Hidden Pivot resistance that is now  support. As a result of yesterday's price action, we also have a lesser rally target at 1133.25 and its sibling midpoint at 1124.25. That last number was resisting the uptrend as of around 6 p.m. EST, but if and when it gives way, the remaining nine points to 1133.25 should come easily. The 1133.25 resistance does not negate the more important one at 1137.25; indeed, it looks as though it could work precisely enough to allow scalpers to attempt a short there with a stop-loss as tight as 1134.25.

When we described the Obama-Reid-Pelosi healthcare monstrosity a couple of months ago as the Bill That Wouldn’t Die, we didn’t mean that literally. We were exaggerating, as you may have surmised, and we fully expected the legislation to smother quickly under the weight of its largely unread 2,000 pages. What convinced us that the legislation could not possibly pass was a lengthy and well-argued Wall Street Journal editorial that labeled it “The Worst Bill Ever”.  The Journal proved its case as far as we were concerned, and we thought it would carry some weight with millions of readers and Washington politicians. How wrong we were. Not only is the bill alive and kicking, but now House Majority Leader Pelosi reportedly is confident that she can deliver enough votes to get it passed.  She pledged the other day to do so even if it threatens the political careers of some Democrats.  For sure, these guys are serious. But the damn-the torpedoes attitude is perplexing, given that the torpedoes are very real; for in fact, voters are actively hostile toward the bill and the likelihood that they will retaliate against the Democrats in November is high. It is not just some Fox-network pipe dream that the elections will bring a quick and merciful end to the Democrats’ strong-arm control of Congress. Pelosi’s Vote Count We are also mystified about how Pelosi will deliver the votes.  She had only three votes to spare the first time around, and it seems likely that the controversy since will have caused at least a few more House Democrats to abandon their support.  Pelosi  and Senate Majority Leader Harry Reid aim to get around a filibuster by using the reconciliation process, but the negatives of this strategy have been so well documented that even the public is