March 2011

It would take a pop today to at least 1411.50 to rejuvenate buyers. Failing that, a downside breach of the 1382.30 midpoint support shown in the chart, particularly on a closing basis, would leave the futures vulnerable to an airpocket down to at least 1358.00 over the near term.

Yesterday's bottom at 1241.25 came off a Hidden Pivot that was precise to-the-tick (see inset).  If the futures continue lower today, expect the same precision relative to the 1231.00 target shown in the chart. A relapse to that price could yield an excellent buying opportunity. Alternatively, bulls would seize the offensive if they can pop the futures above  a small peak at 1263.75 made on the way down yesterday (easily visible on the 15-minute chart). ______ UPDATE (9:41 a.m. EDT):  There being no clear evidence the world was going to end today, stocks have vaulted the ol' Wall of Worry like Princess Bride's Fezzik on steroids. As is so often the case, today's short-squeeze, which got within 1.75 points of a 1275.25 Hidden Pivot target, was mostly over before the regular trading session was more than a few minutes old; thus, most traders, even bullish ones, would have missed it.

The bottom of yesterday's selloff came within 30 points of an 11525 Hidden Pivot that can continue to serve as our minimum downside objective.  However, any slippage beneath that support would portend more weakness to at least 11355.  For anyone looking to catch a trampoline bounce, that number looks like it would be an excellent place to moor a speculative bid with a tight stop-loss.  The provenance of both targets is shown in the accompanying chart. _______ UPDATE (9:52 a.m. EDT):  The Dow began the day with a not atypical short-squeeze, disdaining to curtsy toward our lowball bid.  The thrust was impulsive, implying that whatever pullback that occurs here is just that.

Considering the relentless rumble of earth-shaking news lately, it's hard to believe the Dow Industrials have given up only a measly 800 points since topping in late February. I've noted here before, somewhat facetiously, that it would probably take nothing less than a mushroom cloud over the Saudi oil fields, or a smoldering tanker in the Strait of Hormuz, to truly spook investors.  More and more, it seems this is actually the case. Clearly, this is how the stock market is programmed to react when the irresistible force of a massive global-liquidity blowout is pitted against grim economic realities that augur a possible Second Great Depression.  The bulls (i.e., algorithmic trading-machines fueled by OPM and Fed funny-money) are feathering back at the moment, but shorts had better dive for cover if and when the Japanese restore auxiliary power to their cooling capacity. (And neither should it be overlooked that Japan has recently augmented financial-system liquidity by a reported trillion-and-a-half yen.)  A respite from meltdown worries seems bound to produce a short-squeeze capable of recouping most of the lost ground in just a few days. If so, it would likely be a short-lived spree that will itself succumb to such nagging problems , two name just two, as $5 gasoline and a destabilized Middle East in which the U.S. has almost no role to play.

(Because this essay drew so many interesting comments, I am running it for a second day. RA] With debt spinning wildly out of control and the States threatening to revolt against Washington, we asked some frequent contributors to the Rick’s Picks forum how they thought the economy would look five years from now. The essay below, by Brad Bolz, is quite different from the others because it is based on Biblical prophecy. For starters, he sees a nuclear war in 2018 and then the emergence of an Antichrist in 2021. If such stuff isn’t your cup of tea , please bear in mind that we try to present many points of view here. This one is surely miles from the beaten path -- although, when you consider how screwed up the world is these days, it doesn’t seem too farfetched – at least not to us -- to blame Satan. If you want to skip to the bottom line, Brad predicts near the end of the essay that today’s financial bulls will prove to have been right, although the bears’ predictions of a dramatically lowered standard of living will also be borne out.] Where will the economy be in five years? I’m going to try and use Biblical prophecy for my prediction.  Fools jump in where angels fear to tread, right?  Normal caveats apply. I’m not a prophet nor biblical scholar, but this may be the only a possible framework in which to structure investments.  Investing is changing. Rules and charts guide us, but I suspect we’re approaching a season in which the events that unfold will be observably linked to Biblical prophecy.  Our personal opinions about prophecy won’t matter because, I believe, there are people at the very top who are pushing us toward the End Times. The problem with predictive

Many markets impulsed down yesterday or intensified downward impulses that were already in progress.  Others enjoyed "flight-to-quality" rallies which didn't stick.  Most markets have bounced back into yesterday's range (crude oil excepted), so it's looking like an "inside day."  A good day to keep an eye on key prior highs or lows for clues as to where things are headed.  Also a good day for us to continue to send our best wishes to Rick for a quick and full recovery.  (Posted by Doug McLagan)

We hold 400 shares bought yesterday for 50.40. For now, do nothing further.

The Euro is gunning for a very shortable target of 1.4237.  America's primary exports, namely its currency and its government debt securities, caught a short-lived bid during Tuesday's market turmoil, a flight to "quality" which didn't last long.  The Euro mirrored the dollar, and by the end of the day had turned back up and surpassed an important midpoint pivot which, on Monday, had terminated a strong rally with exactly one pip to spare.  That reversal was good for almost 150 pips, but by late Tuesday the midpoint had been surpassed, leaving its sibling D target of 1.4237 as the next objective.  Given that the Europeans probably don't want their currency too high, for reasons of export competitiveness, traders should welcome any opportunity to short this Hidden Pivot. (Posted by Doug McLagan)  _______ UPDATE (March 22):  The 1.4237 target caught an important high within eight ticks, anticipating today's nasty drop from 1.4229 to a so-far low of 1.4144.  "Camouflage entry" was very tough to come by, even on the very lesser charts, but officially we did nothing.

The e-mini S&P500 futures look bearish, with active targets at 1257.25 and 1231.00.  U.S. stock indices fell sharply during the early morning hours yesterday, doing significant technical damage to their respective charts.  S&P500 futures had already begun a downward impulse wave on the daily chart as of Friday, but yesterday they swept past several more external prior lows, intensifying the strength of the move.  A robust pattern on the 360-minute chart (A=1307.75) has been confirmed and is aiming for a midpoint pivot at 1257.25 and, if below there, to its sibling D target of 1231.00.  Traders bottom-fishing that level should consider putting stops at 1229.75, just below the round number.  These targets will remain valid so long as 1283.75 is not revisited.  As in the gold and silver markets (among others), camouflaged shorting opportunities could prove very rewarding.  (Posted by Doug McLagan)