May 2010

The Dollar Index has met all of the tests we proposed for it earlier, earning the presumption of more upside to at least 90.06, or possibly to 92.48.  In the meantime, bulls have gotten traction Monday night with the creation of a fresh impulse leg on the hourly chart that had eluded buyers during the regular session. This portends more upside over the near term to match -- and possibly exceed -- last week's 87.46 peak. _______ UPDATE (11:46 a.m. EDT):  As expected, a very powerful rally has pushed DXY to a so-far high today at 87.45 -- a single tick from our first target.  Still-higher prices appear likely, since buyers showed no timidity in approaching last week's imposing high.

It's hard to be thrilled about the futures' failure on yesterday's second-wind rally to surpass the look-to-the-left peak at 18.165 highlighted in the chart.  If that happens today it would be an impressive and very bullish feat -- one capable of powering the futures up to at  least 18.705. If not, however, traders could still try bottom-fishing either Monday night or Tuesday morning at  17.620, the as yet (very) tentative midpoint support of the pattern shown. _______ UPDATE (11:43 a.m. EDT):  The downtrend punched through 17.620, implying more selling to as low as 17.420. That target will remain viable as long as the point 'C' of the pattern, 17.820, is not exceeded by a rally. 18.170 is still where the short-term outlook would turn very bullish.

The pullback from mid-May's 1251.00 peak is sufficient in theory to have recharged the futures for a rally to as high as 1369.  However, looking at the weekly chart (see inset) the eye craves more backing and filling to bring the current correction into better symmetry with the earlier correction at k-A.  In any event, a resumption of the major uptrend would be signaled by a 50-point "booster-stage" rally from the so-far point 'C' low at 1168.00 or lower.

DaBoyz have allowed the futures to fall 16 points tonight in an attempt to scare up a bottom they can buy confidently.  Another four points will get them to an obvious spot -- perhaps too obvious -- Friday's 1051.25 low. Nor is it a healthy sign that the June contract has dipped beneath the May 6 panic low twice in the last two sessions without producing much of a bounce. Bottom line: the 1022.75 minimum downside target still looks like a lead-pipe cinch.  Bulls would gain respite on a print today exceeding 1093.75, however, since that would create a quite robust impulse leg on the hourly chart.

Only 471 more points to go before the Indoos reach the bearish, 9595 target (or perhaps 9534 if any lower) advertised here earlier. What then?  It's difficult to imagine that the blue chip average will not take a tradable bounce, but if the Hidden Pivot is hit in the throes of a sky-is-falling crisis, it could conceivably spell more downside to at least 8559, the midpoint support of the pattern shown in the chart. In any event, it will only require a print below 9678 this week or next to create the first bearish impulse leg on the weekly chart since March 2009.

We peruse the Wall Street Journal’s stock-market round-up each day not to find out why stocks may have risen or fallen, but to determine what factors are conventionally thought to have caused such price movements to occur.  This is an important concern for forecasters, since, even if one attempts to get a read on the market using purely technical means, it still helps to understand what is on the diseased brains of the coprolagniacs whose job it is to manipulate shares to the certain benefit each day of Goldman Sachs, J.P. Morgan and other officially sanctioned predators of the securities world. The very difficult task of explaining the stock market’s behavior to readers of the Journal falls most often to columnist Peter McKay, and we don’t envy him his job.  Because he works for one the most important and prestigious financial publications in the world, it simply won’t do for him to say, as we might (and often do), that stocks rose or fell the previous day for no good reason at all – or at least, for no reason remotely related to reality. We think celestial factors play a far bigger role in this than mainstream pundits will ever be permitted to acknowledge, and that a gypsy fortune teller is therefore better equipped than the highest-paid analyst on Wall Street to tell us why the broad averages are likely to go either up or down. So why did shares dive in the final hour of yesterday’s session after screwing the pooch for most of the day?  McKay cited two reasons: fears related to Europe’s credit crisis, and to the tighter rules soon to be imposed on Wall Street. With all due respect to McKay, this simply won’t wash.  As we all know, investors fear nothing so much as the

Gross public social expenditures in the European Union increased from 16 percent of gross domestic product in 1980 to 21 percent in 2005, compared with 15.9 percent in the United States. In France, the figure now is 31 percent, the highest in Europe, with state pensions making up more than 44 percent of the total and health care, 30 percent. via Payback Time - Deficit Crisis Threatens Ample Benefits of European Life - NYTimes.com.

Check out the chart that accompanies todays bond tout if you don't believe that rates on the 10-Year Note are headed down to 2.86%.  This will be punitive for savers and pensioners, but we doubt that foreign lenders will balk if the alternative is still euros.  Shouldn't someone tell them about gold?

Pretty amusing, what passes for "safety" these days, eh? It looks like the bullish frenzy will continue, since Friday's surge speared what had appeared to be a daunting midpoint resistance on the daily chart at 124^31. The 'D' sibling target of that number lies  at 130^04, and although it's difficult to imagine what manner of deranged thinking could conceivably push bonds, even in a Great Recession, to that level, the charts are telling us we should not be surprised if it happens.  For your information, the rally equates to an interest rate of about 2.86% on the 10-Year Note (see inset).