April 2010

We've got several telltales working today, including rally targets for the Diamonds and E-Mini S&P, as well as a correction target for Goldman. We'll evaluate the price action relative to our Hidden Pivot benchmarks during the day, but it'll be mighty interesting if all three reverse their respective trends.

A Hidden Pivot rally target at 112.82 is equivalent to the one at 1219.25 identified in the E-Mini S&P. Let's try to get short by bidding 1.26 for four May 112 puts. I am making this a limit order so that it can be featured as a Pick of the Day. Such trades are designed to be easy enough for traders of all levels of experience to execute and to allow the order to be parked with your broker as a limit order. If you want to monitor the trade and execute it yourself --  a more promising tactic in this instance -- I suggest buying the puts if and when  the Diamonds reach the 112.82 target. Stop yourself out in either case if the puts trade for 10 cents less than their acquisition cost. _____ UPDATE: The Diamonds plunged on news of Greece's growing problems, denying us a chance to get short as planned.  The actual high was 112.18, well shy of the pivot.

A look-to-the-left peak at 1171.80 (12/07/09) is still the number to beat, since a breach would create a very promising bullish impulse leg on the intraday charts. A move through the resistance would also make amends for the failure of the last attempt, which died at 1170.70. There is one more resistance worth noting: 1166.60, a Hidden Pivot lifted from the daily chart (A=1086.10 on March 24). Its 'D' sibling lies at 1208.90.

The weekly chart for June E-Mini S&P yields a very promising (i.e., reliable and nicely tradable) pattern. I say this because in late March there was a 20-point pullback from within a single tick of the 1176.75 midpoint. The fact that the pullback lasted only a day, and that the midpoint was left in the dust just five days later, makes it very probable that 1317.25 will be reached. That would represent a rally of 9% from these levels, and the target should be considered a VERY high-confidence number. For me, that means I will tune out any dramatic forecast that calls for a "stock market collapse" at any time now, before the target has been reached.  More immediately, we should still plan to short 1219.25 even though it has taken far too long for the futures to get there and the target is too well advertised. A 1220.25 stop-loss is appropriate. (Some may have noticed that yesterday's high fell three ticks from a clear target on the 15-min chart: A=1179.75 (4/19), B=1209.50 4/20) and C=1186.25, for D=1216.00.) _______ UPDATE:  After a soft opening, the futures broke sharply on news that Greek's debt had been downgraded to junk.  The selloff did not even remotely affect our bullish target, but it wll shift the burden of proof to bulls for the time being.

We’re so bullish on the stock market right now that we can barely look ourself in the mirror. Having hated the Mother of All Bear Rallies since it began nearly fourteen months ago, we’ve tried to make our peace with it by projecting higher prices the whole way up; by trading from the long side whenever a fat opportunity presented itself; and – this is the fun part – by shorting every upthrust that kissed a promising short-term target. Check the Rick’s Picks archive if you don’t think this works.  It’s fun, as we said, even though it would be nice if just once the pullback following a rally lasted for longer than a measly day or two. Hope springs eternal, though, and that’s why we’d been looking forward to a potentially important top in the E-Mini S&Ps just a few points above yesterday’s 1216.75 high.  On further inspection, however, although our target remains shortable, we determined that the odds of the broad averages taking a flying dive into hell after hitting this target seem remote. There are good technical reasons for this, some relating directly to the E-Mini S&P’s longer-term charts. But one need only look at Goldman’s daily chart to see where the problem lies. Recall that just ten days ago, when the firm was accused by the SEC of flim-flamming investors, the stock went into a freefall, shedding 31 points that day.  That represented about a sixth of Goldman’s total capitalization, and it must have scared hell out of anyone on the wrong side of the move. It would also put a lot of weight on the stock market as a whole if it continues. A Goldman Shakedown? But when you apply Hidden Pivot analysis, the move looks like it was just a fake-out – a ruse by

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A 1219.25 target broached here last week remains as compelling as ever as a minimum upside target, but it has probably been advertised too loudly and for too long for us to expect it to work precisely.  Even so, since every top is potentially an important one, we'll stick our necks out with a 1218.75 offer, stop 1220.25.  You could also try shorting a seconday pivot at 1216.00 that just came onto my radar.  I'd give this one just a two-tick stop-loss, since we may be trying again at the higher number. _______ UPDATE:   The trade can stand as suggested, but the funereal pace of the rally to our target has drained my enthusiasm, turning what should have been a simple task into a project.  Please note that rally pivots work best when they are hit cleanly by a feinting thrust rather than being pawed at for fifteen hours.

Rally targets corresponding to the ones given today for June Gold lie respectively at 18.860 and 19.530. I judge the key resistance to be 18.510, the midpoint resistance associated with the 19.530 target.  It is just beneath April 12's key high at 18.605, but my hunch is that the breach of the pivot, followed by a close above it, will telegraph a thrust above the "structural" resistance.

Please note in today's touts that's it's entirely reasonable for a disinterested chartist to project a rally in the Dow Average to as high as 12471. That would represent a gain of a little more than 11 percent from these levels. As I've noted in the tout, the midpoint resistance associated with that Hiddden Pivot target has already been thrashed.