March 2010

Yesterday's punk performance will have no bearing on the 1137.25 rally target proffered here earlier. It looks like a lock-up, but it will also make for an enticing short, stop 1139.50, if and when the futures get there.  Buyers should look for camouflaged bottom-fishing  opportunities if there's a pullback to 1110.75.  That's the Hidden Pivot midpoint associated with the target.

The daily chart is still bullish, since the last impulse leg to form, on February 18,  has yet to be negated by a trend leg going in the opposite direction. However, the fact that the dollar has been in a holding pattern for a month allows the suspicion that it is in a broad topping pattern. That's nothing that a relatively modest thrust to 81.48 wouldn't cure instantaneously, but until it happens, bets on a continuation of the rally begin in early December are speculative.

There is a pivot on the 30-minute Euro chart at 1.3680, just above the session high so far, but it lies only four pips below an important prior high, and twelve pips below another one, at 1.3692.  A print above there would give a bullish signal.  A move to 1.3840 or higher would break two versions of a bearish daily pattern with targets at 1.3398 and 1.3344 and would indicate a reversal of the Euro's three-month decline.  _______ UPDATE (1:40 p.m. EST):  The Euro came within five pips of 1.3680 before falling more than fifty pips, but then it turned back up and easily surpassed the pivot and the two prior highs just above it.

We would have been ultra-cautious about trading a midpoint only slightly above the "B" point of a hidden pivot pattern, especially in the volatile crude oil market.  But after surpassing that midpoint by only five cents, the market dropped $1.50.  Oil bears who see this as the end of the recent rally should look for small patterns to provide shorting opportunities.  If the market breaks the $81.00 level, however, we should look forward to a battle royale at the 15-month high.  The D target of this pattern, at 84.74, is 22 cents below that high, so we might expect some intrepid pivoteers to be among the front-runners.  _______ UPDATE (1:58 p.m. EST):  In volatile trading after an inventory report, oil rallied above $81.00 and then settled back somewhat.  Oil traders should now be watching for small bullish patterns.

(Editor's note: The following essay provoked a firestorm in the forum, so we are running it for a second day.  The author is Mario Cavolo, a speaker, writer and media personality who has lived in China for more than a decade.  His point of view is far more bullish than our own, and most of those who responded to it evidently do not share Mario's optimism that the world's financial crisis will simply go away.  RA) Let's start with a core economic premise and build a scenario of supporting premises as we ponder the new reality of our global economic future without the rhetorical, crash and doomsday scenarios which almost never play out.  Here is the premise to explore: Nothing will crash or collapse.  Not the Euro, not the USD, not the stock market of this or that country; not anybody’s entire financial system. Assets will swing wildly up and down, systems will change, sometimes dramatically but doomsday collapse is off the table.  People who constantly focus on threats of doomsday this and parabolic that are too addicted to the emotional thrills attached to such moves, or trying to sell you something; rather than applying a more genuine and balanced analysis of the global economic stage which is an increasingly complex, fluid, shifting entity.     Now let us build the supporting premises to see why, keeping in mind the intelligence of an elementary school sixth grader,  to paint a picture of the new reality in the present and for the next 10 years.  The global new reality world is a world with unfathomable trillions of sovereign debt over everyone's heads. It is an ongoing reality, a big part of our new reality. This has been rightfully called a crisis of Biblical proportions. However, based on our premise for this essay, it

The night shift was uncommitted as of midnight EST, although I've assumed in Tuesday's touts that the broad averages will continue to trend higher.  The E-Mini S&P could offer an excellent camouflage entry opportunity if the rally plays out as described.

With the dollar benefiting from perceptions that other currencies are in even worse shape, and with institutional mindset still riveted on the idea of the dollar as a "safe haven," gold has shown no great eagerness to resume the long-term bull trend.  If and when it does, however, the initial lurch should carry to 1144.50, the midpoint resistance of the pattern shown in the chart.  However, a close above it is needed to light a fire.

The 1118.50 rally target we used yesterday remains valid and may put up some resistance, but because shorts seem to be getting no relief, it's probably time to consider the larger pattern shown in the chart. It yields an 1137.25  target and an 1111.00 midpoint that has already been breached decisively. If you're looking for a potentially easy way to get long, use a pullback from just above either of the small peaks recorded on January 21-22. _______ UPDATE (9:50 a.m. EST):  The futures have opened on unsurprising strength, surpassing the January 21-22 peaklets.  This has created a bullish impulse leg on the hourly chart (A=1112.75, B=1122.75),  but because it is unbroken for 10 points, camouflage will be difficult to find for a conventional entry at a point X. (Indeed, two C/x combinations have already formed as of the moment, suggesting there are two many overly eager bulls.)

After declining sharply since early December, the Euro has begun to turn sideways.  There is strong hidden pivot support just under the 2010 low, provided by D targets at 1.3398 and 1.3387.  The first of these is from a daily pattern that has remained active for almost three weeks.  The latter is from a 90-minute pattern which will be in effect so long as 1.3581 is not revisited.  Its sibling midpoint is at 1.3484.  Below all of these levels is another hidden pivot at 1.3344.  _______ UPDATE (5:24 p.m. EST):  The Euro traded through the 1.3484 midpoint and made a new 2010 low, but it reversed above our other targets and rallied far enough to cancel the 90-minute pattern.  Pivots at 1.3398 and 1.3344 will remain in effect so long as 1.3840 is not revisited.