February 2011

A midpoint resistance at 57.96 makes a logical rally target for today (see chart).  Let's try to leverage it by buying four March 57 puts, which should be trading for around 0.88 if the Cubes reach our price objective.  A stop-loss at 58.12 is advised, and if it's hit the options should not have lost more than a nickel or so of value.

Bears turned in an underwhelming performance yesterday,  letting bulls mop the floor with them after they'd succeeded briefly in pushing the Dow 120 points lower.  I found myself wondering aloud during yesterday's impromptu trading-room session whether only a black swan event could cause the selling to snowball.  Still, the impulse leg generated so far looks fairly impressive on the daily chart, and it may have even further to go, since there has not yet been a b-c correction to end it. (That would occur today on a print of 1311.00 or higher.)  Traders can try bottom-fishing at 1274.50, stop 1273.75 (!) provided the 1311.50 Point 'C' of the pattern has not been exceeded to the upside.  Buyers would put bears seriously on the ropes today if they can squeeze this vehicle above 1320.50.

[All hell broke loose in the Rick’s Picks forum yesterday after Mario Cavolo, an unapologetic optimist who tends to see the glass as three-quarters full, let fly with the rosiest pronouncements we’ve heard so far on a U.S. dollar that has been sinking in value for nearly ten years.  “So okay then,” wrote Mario. “We’ll devalue the dollar and a few years later, when U.S. assets are more and more attractively cheap, the money and investment and growth will start to flow back in.”  This was just too much for Robert Moore, an intrepid blogger and occasional guest essayist on this page. Mario’s entire post can be found by clicking here. Below is Robert’s response.  RA] And how exactly does a weakening currency result in more attractive domestic prices? Or, are you suggesting that as the currency weakens that it will mean stronger U.S. exports, and therefore greater domestic growth? if so, then how, exactly, will these miraculous exports be manufactured?  The cynic in me says that the U.S. will have to hit a very deep and rocky bottom before manufacturing and the ability to export the surplus ever returns to these shores. Our manufacturing infrastructure is decomposing, our labor rate to productivity ratios are the most God-awful on the entire planet (they are now even worse than the UK’s, and that is really saying something), and, as Wisconsin demonstrates, the people in this country still seem to feel that they are entitled to a six-figure gross income in exchange for doing manual labor that requires no more than 200 hours of vocational school training to qualify for.  We are a long way from Mario’s utopian renaissance. However, I do agree that at some point, the “genius” target of Mario’s man-crush will succeed in devaluing the dollar past a heretofore

I've taken our Big Top rally targets in AAPL, the Mini-Dow, SPY and the Mini S&P off the marquee, since all have generated bearish impulse legs of daily-chart degree.  The targets are still viable in theory, but buyers will need to do some heavy lifting to restore them to significance.

Late Wednesday night, Silver was hesitating after an impulsively bullish thrust of nearly 80 cents earlier in the day. To keep the bad guys on the run, the March contract will need to refresh the bullish impulse with a pop above the  33.985 look-to-the-left peak shown in the chart.  As of this moment, there did not appear to be any compelling opportunities for night owls on the lesser charts.

Hidden Pivots aside, April Gold faces crucial resistance at 1426.30, the lowest of three important peaks recorded since November. Night owls looking for a way to board using camouflage should go to the 10-minute chart or lower and apply the entry rules with mechanical detachment. If Gold is about to head higher, we should see minor, downtrending abc patterns reverse from their c-d midpoints.

We'll set aside some promising rally targets at 376.84 and 383.50 for now, since Apple's selloff has gone impulsive on daily chart.  It's too early to assume The Top is in, but we'll know more once we've seen the C-D follow-through play out to, or perhaps beyond, its midpoint.

Both major and minor downthrusts have consistently failed to produce Point 'B' lows that exceeded some obvious external low.  That is the same as saying they have been "sausage," with the implication that any bearish targets derived thereof will not be as reliable as those produced by "legitimate" impulse legs.  That said, the visual logic of the pattern shown yields a passable target at 76.15, and it is that Hidden Pivot that I will suggest using as a minimum downside objective for the near term.

We were nicely ahead of the plunge yesterday during the weekly tutorial session. Now, our focus should be on the C-D follow-through leg once a retracement high has been made.  Even with a bearish bias, we should look to bottom-fish at the 'p' midpoint of a pattern like the one shown. ______ UPDATE (10:57 a.m. EST):  A pattern much like the one shown did indeed develop, but the futures overshot its 12038 midpoint by 34 points.  This implies more weakness ahead, notwithstanding the presumably phony, 110-point bounce that has occurred this morning from the lows.