May 2010

We should tone down the hooting and guffawing for the moment, since  the futures did manage to poke their ornery little snout above Friday's and Monday's highs before heading south yesterday.  This left a bullish impulse leg on the hourly chart, and even though the pullback was continuing into the night, DaBoyz will have strong seasonality (i.e., Memorial Day weekend) in their favor if they should wish to turn things around on Thursday.  The good news for bears  is that buyers were unable to capitalize on a truncated but still powerful impulse leg that occurred with two hours left to go in yesterday's session.

The action on Wall Street is starting to remind us of Harlem Globetrotters shtick. Yesterday’s comic show conjured up Meadowlark Lemon at the free-throw line:  He pumps once, he pumps twice, then he sends the ball arcing toward the basket. Half-a-dozen guys leap for the rim, only to see the ball, which has been tethered to Meadowlark’s finger by an elastic cord, snap back into his hand. Something like that occurred yesterday on the NYSE, where stocks opened on a vaulting arc, only to be hauled back down to earth in mid-flight. Although the Dow had been up about 135 points in the early going, by day’s end it was trading off 70 points. The bullish segment of this raucous little burlesque appears to have been inspired by some tarted-up data that reflected supposed strength in the housing market. Yeah, sure. As for the selloff and eventual 220-point reversal, there was no obvious reason for it.  Our take is that the elaborate hoax that has cajoled stocks higher since March 2009 has grown too tiresome to fool even some of the people some of the time. There is still Kudlow on the buy side, of course, and perhaps a handful of solvent bears covering shorts whenever “good” news threatens to trigger a squeeze. But that’s about it, and whatever newsworthy excuse might arise on a given day to goose and goad the fearful and the clueless into acquiring shares, the effect is growing more and more muted each day, a diminuendo for the hubris of the late, great Financial Age. August Gold Target We should note that bullion yesterday reflected none of the ambiguities that have caused stocks to trace out conniptions each day on their respective charts. Comex August Gold tacked $30 onto the previous day’s lows, and the futures

Darth Vader and DaBoyz were not loosening their grip on shorts Tuesday night, and they had the E-Mini S&Ps up as much as 11.50 with barely a pullback along the way. It all looks a little too ambitious to me, so night owls should be extra cautious about getting sucked in at these heights.

I'm not buying any of this -- literally -- since it is coming off a 133.81 low that lies almost $2 beneath  the lowest low I could have projected using the hourly chart. That suggests sellers will soon resume control, even if it  would only take a print today at 144.31 to temporarily cede the advantage to the madmen.  Incidentally, a pullback from just above 144.31 could provide camouflage for traders who want to jump on the stock for a presumptive short ride north.

Early Thursday night, the futures appeared to be mustering the energy to take on not only the 18.165 peak we benchmarked here yesterday, but a second more daunting one at 18.330. The latter lies 20 cents above this evening's so-far high, and 13 cents above a minor HP at 18.200, so buyers will have their work cut out for them. A close above 18.330 would portend easy progress to at least 18.795, the Hidden Pivot midpoint of the large pattern shown in the chart.  I have used the lowest possible point 'A' in this instance to project a target because all of the jiggle-jaggle that followed it did not surpass the first "external" peak at 17.895.

The rally sputtered out a tad shy of a Hidden Pivot target at 1209.40, but expect it to get there today -- or possibly to  1213.60 if any higher -- before buyers run out of steam for perhaps a short while. Both targets are shown in the chart, and both are clear and compelling, so a push past them should be treated as good news for bulls.

Despite yesterday's hyperdrive recovery off a 1036.75 low, I'll stick with the 1022.75 target given here earlier.  It may be a while in coming, since shorts will have been spooked pretty badly by the hysterical buying in the final hour, but I do believe it will come nonetheless.  In the meantime, there are two external peaks on the daily chart by which we might gauge the persistence of any mania that develops. The first lies at 1088.75 and is easily within reach, but the second, at 1147.50, will be much more challenging.  The 1022.75 target will remain valid in any case, so long as 1174.75 (aka point 'C') is not exceeded to the upside.

We are revisiting Lean Hog futures because we put out an informal, long-term short a while back in conjunction with a new service that may be offered by Rick's Picks in the future. For now, though, let us note that the  downtrend from late April's highs looks like it will reach a minimum 78.400, or perhaps 77.100 if any lower, before bulls get much traction.

How far can this short squeeze go, right?  Many of those who bought into it may feel chastened when the markets spring to ostensible life Wednesday morning, so don't expect the hysteria to work wonders for a second straight day.  Fortunately, we can use an objective benchmark to tell us if things are getting out of hand:  last Thursday's 10272 peak.  Any progress above it today would need to be taken seriously, even by those of us who have to stifle a laugh every time stocks leap the Wall of Worry in a single badly misconceived bound.