May 2010

A midpoint bounce in progress lends credence to one of two lower "D" targets, should the midpoint support be broken.  The Yen has been working its way lower since early December, approaching parity with the stalwart American cent.  There are two active versions of a strong pattern on the daily chart, differing in their "A" points.  Just hours before we came to appreciate the second of these for the first time, the futures stopped falling one pip above its midpoint pivot of 1.0531.  Alas, we are left to observe that if this support level gives way, especially after a substantial bounce, then we should focus on buying its sibling "D" target at 1.0138.  The alternative "A" point has its merits, however, so traders should be aware of its "D" target at 1.0340, which we have touted twice before.  Stops should be at 1.0129 and 1.0329, respectively. (Posted by Doug McLagan) _______ UPDATE (11:05 p.m. EDT):  The bounce from one pip above the midpoint pivot was sizeable, but since late afternoon the Yen has given back most of those gains.  We continue to like both of the "D" targets, especially the lower one whose sibling midpoint performed so well. _______ FURTHER UPDATE (May 6, 11:33 a.m. EDT):  On Wednesday, the Yen came back down and made a double-bottom at the exact prior low of 1.0532, one pip above the midpoint of the daily pattern that we favored.  Last evening, the futures traded up too quickly for us to finish a new tout using A=1.0539 on the hourly chart; the midpoint was surpassed by one pip and the pullback was worth almost $1000 per contract.  The hourly "C" point was left narrowly intact.  Again with lightning speed, the futures rallied today, through the midpoint.  The "D" target of this pattern is at

There was a nice camouflage opportunity playing out in June Gold as we went to press, but don't be discouraged if you miss it, since there are some more "external" peaks on the 5-minute chart to play with if bullion moves higher this evening.

We're using a Hidden Pivot at 1208.80 as a minimum upside target for now, and it is looking less and less like we'll see an opportune pullback first to its 1166.60 midpoint sibling. This implies that trades from the long side are more likely to use camouflage afforded by the uptrend than to use retracement targets for bottom-fishing.  FYI, as of 7:24 p.m. EDT, the futures were working on just such a camouflage pattern, having tripped a buy signal at 1184.10 (stop 1183.40; see chart). _____ UPDATE:  Gold got socked for a $15 loss today, bringing it down as low as 1166.90.  Bottom-fishing below 1170.00 is advised, but it should preferably be done using such camouflage opportunities as minor abc uptrends may afford us.  I suggest looking for this leverage on three-minute charts or lower. 

The big picture promises 21.53 eventually, subject at worst to a possible pullback to the 18.155 Hidden Pivot midpoint associated with that target.  More immediately, the futures need only improve on yesterday's 18.890 high by two cents+ to shatter whatever feeble hopes JP Morgan and their ilk have right now of containing bull fever.  Once above December's 19.420 peak, the futures will become an odds-on bet to hit a minimum 20.305 not long thereafter. _______ UPDATE (11:43 a.m. EDT):  Silver has been hit hard today, and it is not a happy sign that the downdraft  came from an 18.890 peak that fell 2.5 pennies shy of surpassing last January's peak, 18.910.  The daily chart is of course still bullish and will remain very much so all the way down to 16.590.  But the failure of the futures to refresh the bullish impulse on the daily chart before they went into correction mode today suggests that a perhaps tedious correction lasting several weeks lies ahead before bulls can mount an assault on  December's watershed high at 19.420.  Most immediately, the hourly chart has registered a bearish impulse leg but no upward B-C correction, so targeting and trading are possible at the moment only on the very lesser charts.  However, it would take a fall exceeding 17.515 to turn the daily chart bearish.  That is the point 'C' of a bull pattern projecting to 19.535, a target that is still valid.

There were short-term targets as high as 89.61 broached in the chat room, so let me weigh in with my favorite, from the 180-minute chart:  88.85, based on a one-off A at 80.03 recorded on March 26.   Long-term bulls will need to push the futures above 110.90 to hint that they're gunning for new all-time highs in the $150 range, but on the daily chart it would take merely 90.11 to refresh the bullish impulse. ______ UPDATE (May 7):  The futures turned lower after topping at 87.15.  They subsequently breached a midpoint support at 74.65, but a close below it would imply more downside to as low as  71.10.

The rally from mid-April's 392.57 low  slightly exceeded a 471.54 target, but we should be less than thrilled because the high itself fell  just a smidgen short of an important peak at 475.32 recorded back in January 11.  While that is not bearish per se,  it does suggest that any attempt to challenge the watershed high at 516.16 recorded in December is likely to be a labored affair. If the HUI were fixing to blow this resistance to Kingdom come, it would have displayed its feistiness by kicking 475.32's butt when it had the chance.  It'll have a second chance at 469.72, a midpoint resistance tied to a 'D' target at 576.19.  If HUI can bulldoze the resistance and close above it for two consecutive days, I'd rate it an even-money bet  to take on December's key high at 516.16 successfully and without too much bloodshed.

I mentioned in today's commentary that the 1176.25 midpoint support on the weekly chart is crucial to my outlook for the summer.  To keep the discussion simple, however, what I did not say is that the decisive, 40-point thrust beyond that midpoint is reason for us to have a strongly bullish bias at the moment; moreover, even if the midpoint is subsequently trashed to the downside, we'd need to at least keep an open mind about the 1317.25 target until such time as the point 'C' that engendered it has been broken. Most immediately, I'm not going to hazard a guess about what the futures might do today, since the last three days' action, if that's what you want to call it, have occurred inside the gratuitous chop of the two weeks that preceded it.  Traders should look for camouflage on the strongly bullish sign that would be generated by a print at 1210.25.  As you can see on a 180-minute chart, that would surpass an internal and external peak. ______ UPDATE:  I posted a worst-case low of 1168.00 in the chat room (11:05 a.m. EDT) when the futures were plunging but still above 1170.  They subsequently bottomed at 1167.00, so a stop-loss as tight as 1.25 points would have sufficed. If you initiated the trade, partial profit-taking is advised at 1171.75 or higher. (The bounce so far has carried to 1173.50.)

Hunting for relative bargains yesterday morning, we waited in vain for the index futures to come down below Friday’s levels. Alas, prices held relatively firm in the opening hour, eventually inducing yet another flight of fancy by the broad averages.  By day’s end, the Dow was up 143 points, recouping most of Friday’s losses while adding further to the one-way tedium of this Mother of All Bear Rallies. To put Mama Bear in perspective, the weekly chart now reflects the possibility, if not yet the likelihood, of a 125-point upthrust in the S&P 500 mini-futures.  That’s 10 percent above yesterday’s settlement price, and although the move would qualify as parabolic if it happens soon enough, it would actually lag the rally to 12471 that we predicted here a while back for the Dow Industrials. The weekly chart of the E-Mini S&Ps shows why the odds of a strong blast higher have increased lately. Using our proprietary method of analysis, the key price on the chart is 1176.75.  That number is a Hidden Pivot “midpoint”, and it is directly correlated to an important Hidden Pivot well above these levels at 1317.25.  Although the lower number was technically a resistance until recently, it became support when the June futures contract blew past it, topping last week at 1216.75. Very Cautiously Bullish Ordinarily, we would assume the higher number (i.e., 1317.25) will be reached if its lower “sibling” is exceeded as decisively as has occurred here. But we are being extra cautious in our bullishness because the market looks especially vulnerable to a sudden, even spectacular, selloff.  There are a few reasons for this. For one, until last week stocks had risen for eight consecutive weeks on declining volume, implying, as our friend Chuck Cohen has noted, that investors are “supremely confident.”  We

Bob Bronson takes a closer look at the 3.2% GDP growth recently reported, only to discover that statistical sleight-of-hand was used to hype non-existent growth (For a look at some interesting charts pertaining to growth and the likelihood of a double-dip recession click here, then click on one of the charts that comes up in your browser): "They’re at it again.  Permabulls and new bulls promoting the notion that a deep or sharp V-shaped recovery is well under way, using just-reported Q1 GDP data for support. Instead of noting that the headline figure of 3.2% annualized growth was down 40+%  from the Q4 growth rate of 5.6%, showing sharp deceleration in the so-called economic recovery, they’re saying that Q1 was the third consecutive quarter of positive growth following three quarters of negative growth, suggesting a picture of a balanced V-shaped recovery, precluding a double dip recession. "In fact, the GDP growth rate previously declined four quarters from its Q2 ’08 peak and six quarters from the NBER designated start of the recession in Q4 ’07.   Moreover, it declined seven quarters from the Q3 ’07 peak of what we define and carefully track as the core business cycle – see the first chart below. Still further, the shape of the recovery is much worse than suggested by even seven down quarters followed by three up quarters, since the rebound to date has retraced only 17% of the total decline, rather than the 42% suggested by a picture of a three-sevenths or greater retracement.   "Both permabulls and new bulls know, or should know, that a double dip recession, with its W-shaped bottom, starts with a V and is followed by a second V, so in any event the characterization of a V-shaped bottom doesn’t at all preclude much more complexly extended bottom formations.