March 2011

There are two targets below, and shorts who catch a ride should be alert for a bounce from either (or perhaps both:  11921 or 11877. The lower number maxes out the hourly chart, suggesting that scalpers would enjoy favorable odds attempting to bottom-fish there with a stop-loss as tight as 6-7 ticks.  Keep in mind, though, they you will be getting in front of a downtrend that could only just beginning to show its power.

Yesterday's exhilarating plunge may have felt special, but on the hourly chart (see inset) it was of a piece with the chop-and-slop price action of the last few weeks.  Is it the initial rumbling of an avalanche?  We may be better able to answer that question after we've seen how aggressively sellers attack a Hidden Pivot support at 1286.50. That's my minimum downside projection at the moment, but look out below next week if it's decisively exceeded, especially on a closing basis.

No one thought it would be easy for state and local governments to get their budgets under control. However, by eliminating collective bargaining for most public employees, it appears that Wisconsin Gov. Scott Walker may have paved the way for other states to succeed at it. One good thing to notice is that Wisconsin turned out not to be…France.  Try to imagine what would happen if a synateur were to propose raising the retirement age by a year or two, or shortening the French worker’s god-given two months of vacation by a week. You’d have a torch mob marching on Paris within hours, and the lawmaker’s effigy would be hanging from lampposts from Paris to Marseille. Windows would be smashed and cars set aflame.  Not in Wisconsin, though. Labor turned out tens of thousands of angry if peaceful demonstrators, but in the end that wasn’t enough to carry the day. There wasn’t a Democrat in the chamber when the final vote came yesterday, but the result was clear enough: only police and firefighters, who put their lives on the line every day, will retain collective bargaining rights.  Few workers in the private sector will feel much sympathy for Wisconsin’s public employees, since the latter have for years enjoyed an extravagant level of health care and pension benefits that the private sector can no longer afford. Neither can taxpayers, though, and that was the point all along.  The labor unions will turn out in force in every state everywhere Gov. Walker’s legislative tactic is tried, but they will be vastly outnumbered by those who would pay dearly to maintain the status quo. Moreover, so many states and municipalities are verging on either bankruptcy or truly drastic cutbacks that there will be no choice about public workers settling for less. Much less.

A childhood friend of mine, Bonnie Roche-Bronfman, a New York architect with a terrific imagination and talent that radiates in many directions, is involved as set designer for a production called "From the Fire."  The drama commemorates the 100th anniversary of the tragic Triangle Shirtwaist Factory Fire, a galvanizing event in the evolution of the country's labor laws and social reform.  The show is scheduled for a five-day run in the Judson Memorial Church and has already gotten some great press, including an upcoming article in The New Yorker.  For show times, tickets and further details, click here.

A rally target at 1.4046 took so long to reach that I'd forgotten about it.  The actual top occurred a few days ago at 1.4035, and the pullback since has been nasty.  It projects to at least 1.3766, but if that target is breached badly it would imply significantly more weakness ahead.

My immediate upside target is 37.300, but if the futures settle above it for two consecutive days, look for the rally to continue to at least 39.620. Night owls will not have much to shoot for, since Wednesday's action was just dueling impulse legs. Bulls hold a slight edge at the moment (10:30 p.m. EST),  but they'll pick up some steam if they can push above a midpoint resistance at 36.080 that can be found on the five-minute chart (A=35.820, B-36.270 and C=35.855). _______ UPDATE (10:29 a.m. EST):  Today's plunge seems likely to continue to at least 34.365, a Hidden Pivot support that can be found on the 30-minute chart (A=36.190, B=35.085, and C=35.470). If that number is breached by more than three ticks, however, expect the futures to test structural support near 34.

The gratuitous molehill traced out by yesterday's price action did nothing to alter a 1459.40 target that currently serves as our minimum upside objective for the short term. A modest thrust today exceeding 1434.80 would get the futures off the launching pad, but they need only close above 1431.40, the midpoint resistance of the pattern shown, to imply they're on their way to its 'D' sibling,  at least, 1438.20.  Alternatively, if there's follow-through to yesterday's weakness, try to buy 1421.50 with a six-tick stop. _______ UPDATE (10:24 a.m. EST):  Precious metals have come down hard today with the stock market.  Gold's so far low at 1410.70 is in a stupidly obvious place, a tick from a key intraday low made a week ago.  When it breaks through, expect the selling to continue to at least 1406.30.  Because this morning's low is actually a tick below the March 3 low, the move is bearish impulsive, possibly opening the door to a camouflage short.

The Dow has a clear rally target at 12572, although the lengthy sideways movement since mid-February suggests bulls are not in great shape to take their epic hoax to a new level. Hoax or not, we can continue to look for a breakout, and to play it with relatively little risk, by focusing on impulse legs that develop on charts of 15-minute-degree or less. Alternatively, if the Indoos drop dead, reconciling themselves with natural law, look for the first air pocket to hit 11876.  _______ UPDATE (3:20 p.m. EST):  With the Indoos off as much as 240 points so far today, it's become pretty obvious which  of the two targets is going to get hit.

We went bottom-fishing in the E-Mini S&P at a delicate target, only to get stopped out for small change. This is telegraphing more weakness on Thursday, since it was the lowest target I could have projected using the five-minute chart.