August 2010

I've projected a very bullish 140^20 target for the September Bond futures, but there's a good chance for a pullback here, since yields came within inches of the crystal-clear Hidden Pivot target at 3.45% shown in the accompanying chart.

Yesterday's swoon just missed my target, although a couple of eagle-eyed pivoteers in the chat room noticed that by NOT using the one-off 'A' to do the calculation, as is my habit, one could have nailed the 1037.00 intraday low to-the-tick.  I'd do it again if faced with the same choice, however, since I've always been a sucker for hottie, one-off 'A's like the one in this case.  So now what?  The subsequent rally created a bullish impulse leg on the hourly chart, confirming my earlier suspicion that the market has been too, too resilient recently in the face of some of the worst economic news since the 1930s. But then,  I'd already mentioned my skepticism about the Hindenburg Omen, which has flashed three -- count 'em, t-h-r-e-e! -- signals lately. It couldn't have helped that even the Wall Street Journal took note of 'Hindenburg' this time around.  For my part, I'll simply go with the flow for now, drum-rolling the 1067.75 rally target shown in the chart.  Its sibling midpoint is 1060.75, and any rally that exceeds that number would imply more upside to the target itself. Of course, all bets would be off if the point ''C' low is breached first. As of around 2:30 a.m., it was still in play, albeit barely. Note to night owls:  I don't trust this one, but if a second point 'C' forms you should jump on the new 'X' trigger with a buy-stop. _______  UPDATE (12:04 p.m. EDT):  Waiting for a second 'C' to form as suggested would have worked nicely, triggering a long entry at 1057.25 and partial-profit-taking  at 1060.75, the Hidden Pivot midpoint of the pattern. The futures turned flaky 1.00 point above it, though, and went into gratuitous spasms on the regular-session opening.  They are trading slightly lower on the day at the moment, but it still looks like bears are

With the gold price just now making a new four-week uptrend high, the Hidden Pivot outlook is entirely bullish, on the eve of COMEX gold and silver options expiration.  Gold has rallied more than $84 since its July 28 low, and that leaves us with no meaningful bearish patterns to provide bottom-fishing levels.  Once again we will have to watch the action and judge the patterns as they take shape.  Is this lengthening rally going to continue and perhaps even accelerate, or will it reverse course soon for one last seasonal downtrend?  The attached graphic shows some levels where gold might make the turn, if it is going to do so.  Not shown is our elderly 1244.2 target, which has not yet been touched, let alone broken, and which seems to have blocked the market's progress for the better part of a day now.  Tonight's high is more than 99% of the way from "C" to the 1244.2 "D" target, which is a hit in my book.  Maybe the anti-gold cartel will launch the usual options-expiration takedown from right here.  (Posted by Doug McLagan)

You’ve got to wonder what the banks have in mind now that they’ve raised credit card rates to an average 14.7 percent, up 160 basis points from a year ago. Are lenders perhaps trying to tell us that they are no longer interested in advancing cash to users of plastic? After all, what shopper or diner would borrow a dime with a credit card if it carried such an exorbitant interest charge? And even if there were borrowers at such usurious rates, how many of them could be counted on to service their loans indefinitely (which is how long it would take to pay off such loans)?  It’s not as though the banks can go after delinquent borrowers with such time-honored tools of the loan shark as baseball bats, brass-buckled belts and straight razors. Still, we have to assume the banks know their business and that they think they can make a profit by charging economically lethal rates on unsecured balances. But if you or I were making such loans, we’d probably be asking ourselves up-front, How desperate does someone have to be to run up credit-card debt at 14.7%?  The answer, obviously, is:  the kind of person we would not want to lend money to. So why are the banks doing it anyway? It’s possible that although they don’t actually know how things will play out, they believe they’ve pegged rates high enough to compensate for new regulations that will make it more difficult for them to lend as they traditionally have – i.e., with the same loving kindness and respect for their customers as Frankie the Camel and rent-to-own furniture stores. And who cares about high delinquency rates when there will always be a few customers willing and able to pay $6 for $5 (and presumably much more

I checked the Indoos as an afterthought and discovered that yesterday's bottom came even closer to a crystal-clear correction target than the E-Mini S&Ps.  This is not bullish on its face -- at least not yet -- but it does warrant our close attention, since an upturn from the low would be logical.

Newmont slightly exceeded a key support yesterday -- a Hidden Pivot midpoint at 55.88 -- but only by seven cents, so we'll assume that it is still intact.  If the stock should close below the pivot, however, or trade more  than 10 cents below it intraday, that would indicate a likelihood of further slippage to as low as 51.54, our midpoint's 'D' sibling.

Fair-weather fans of the dollar should be encouraged by its recent price action. DXY appears to be consolidating at the 'p' Hidden Pivot midpoint of the bullish pattern shown, since much of the oscillation has occurred above it. If and when this number is decisively exceeded, look for the thrust to carry to its 'D' sibling at 84.85 straightaway.

Tuesday's wild gold trading left us with confirmed patterns pointing both up and down on the daily chart, a technical picture which echoes the mixed short-term outlook based on other factors.  The low Tuesday morning marked the biggest pullback of the four-week uptrend, but most of that pullback was erased during the sharp two-hour rally that followed.  Duelling commenters in the chat room suggested (1) that the low of the day felt like the late-August seasonal low, but (2) that retail physical demand remains weak since the price rose above $1200.  Traders with seasonals in mind should not forget the late-October low of 2008 and the action in stocks and Treasury bonds at the time.  More immediately, COMEX gold and silver options will expire tomorrow, an event which often has a way of exerting downward pressure on price.  So long as the recent high of 1239.5 is not touched or surpassed, the new bearish targets shown on the left side of the graphic will remain active.  Both midpoint pivots, at 1193.2 and 1185.4, are potential buying levels.  Our orientation is toward getting long, but the bullish pattern on the right portion of the graphic does not give us a low-risk way to do so.  Traders should look for a camouflaged entry, especially one that involves an impulse to slightly above 1239.5. (Posted by Doug McLagan) _______ UPDATE (2:02 p.m. EDT): Shortly before 5:00 a.m. EDT, gold popped up to 1241.7, cancelling the bearish daily pattern.  The subsequent pullback gave us a good-looking pattern on the 15-minute chart (with A=1231.9) projecting to D=1243.6.  The futures obliged by peaking at 1243.4 and then dropping by more than seven dollars.  Alert pivoteers therefore had multiple opportunities to profit based on the morning's action.  The high of 1243.4, which has been hit twice, is

It was painful to watch bears struggle for yardage yesterday, even though they had the "best" bad news in months to help them out.  With the Guvmint's $8,000 tax credit no longer available to home buyers, housing starts have of course collapsed.  This could not have surprised anyone save Kudlow and a few thousand economists, really, but it is in the nature of Wall Street to feign "shock" whenever such truly bad news crosses the tape.  When the dust had settled, however, the Dow was off just 133 points, well off the day's lows; and the E-Mini S&Ps had yet to achieve our Hidden Pivot target at 1040.25, having gotten no lower than 1044.00.  I predicted a relapse to the target during yesterday's weekly tutorial session -- and it shall pass, I am sure, in the fullness of time -- but the target itself holds less and less appeal with each new day's failure to achieve it.  A 1038.75 stop-loss would be appropriate for traders who, bored out of their minds, are eager  to so "something" just to keep from rusting up.