May 2011

I'll be tracking the dollar more closely than usual in the days and weeks ahead, since we wouldn't want a major bull move to get started in plain sight without suspecting it. The rally so far has been unimpressive, stalling at some minor resistance points before pulling back for another charge.

As of around 9:15 Sunday night the  futures were stealing up on a minor midpoint resistance at 36.130 that could hold the key to Monday's performance.  This Hidden Pivot's 'D' sibling lies at 37.825, a number that would become our minimum upside target if the lower resistance is exceeded by more than 3-4 ticks.  The pattern is best expressed on the three-minute chart (see inset).

The rally that ignited Thursday night turned leaden as the week ended. Although moderate upward movement continued into the closing bell, it wasn't nearly strong enough to adrenalize bulls Sunday night.  From a Hidden Pivot perspective, what we should notice is that the intraday peak at 1498.50 failed by a few ticks to surpasss the look-to-the-left peak at 1499.20.  As a result, the futures will begin the new week needing to impulse above that peak and the next, 1504.50, to back the bad guys up a few crucial steps. _______ UPDATE (12:53 a.m. EDT):  Now we're cooking with gas! The futures have exceeded both peaks, coming within a single-tick of the 'D' target (3-minute chart) of A=1474.60 (May 6, 8:33 a.m. EDT) B=1498.20, and C=1418.30.  Minimum upside over the very near term if they break out again: 1514.00. This target can be found by substituting for the point 'A'  above, the 1465.50 one-off low recorded May 5 at 3:45 p.m. _______ FURTHER UPDATE (4:22 p.m.):  Gold rallied a robust $22 today, achieving an intraday high at 1513.90 that missed my target by a dime.  Stay tuned for the next.

We can use the pattern in the chart not only to determine whether the downtrend has significantly further to go, but to bottom-fish its 'd' target, a Hidden Pivot at 132.93. The 145.90 midpoint has already been exceeded by 2.10 points, so odds of more downside over the near term are high.

Last week's rally was impulsive on the hourly chart, albeit with some hesitancy, but we should set a higher standard for turning bullish ourselves, since the dollar has done nothing to earn our -- or anyone else's -- trust.  Dollar bulls are obviously about to get some mileage from the cyclical bashing of Europe that has begun anew, like the swallows' predictable return to Capistrano. But because there's always the chance that Spain's financial house of cards is going to come tumbling down one of these times, we should be alert to the dollar short-squeeze that this would catalyze.  In any event, use the two 'external' peaks shown on the chart to judge the rally's strength.  If a bull market is a-borning here, then we should see an upthrust surpass both of those peaks without an intervening b-c correction.

When the Wall Street Journal headlines a supposed crash in commodities, as the newspaper did over the weekend, we want to pay particularly close attention to signs that the selling may be near exhaustion.  In actual fact, however, still more weakness was augured last week when the July futures contract decisively breached the 3.9915 Hidden Pivot support of the pattern shown by 7 cents. Traders should therefore be looking, not for a major bullish reversal, but for a rally to get short.  It could take perhaps 4-6 days to unfold, however, since the 3.9915 target just exceeded was three months in the making. ______ UPDATE: Without much of an upward correction, the futures have embarked on a new leg down -- one that projects to as low as 3.7450. The 3.9145 midpoint support associated with that target has already been exceeded by a penny-and-a-half, so more weakness looks like a good bet.

The futures have opened on an upward gap into the approximate middle of Friday's gratuitous ups and downs. The move equates to a Dow rally of about 50 points, but the mood could change, as it frequently does, before Monday morning's opening. Through it all, we shouldn't fail to notice that the 1371.00 Hidden Pivot that I'd presumed would mark yet one more temporary peak has yet to be challenged.  Might it actually turn out to have been the Mother of All Bear Rally tops?  Since it's counterproductive to speculate, we'll focus on leveraging the possibility by seeking aggressively to get short.  Accordingly, I'll recommend doing so at 1358.25, the 'D' target of the pattern shown, using a 1.00-point stop-loss. To make this gambit more interesting, and perhaps more profitable, we'll also try to get long for the ride from the midpoint to the target.  As it happens, on the five-minute chart the midpoint lies between two peaks at, respectively, 1344.00 and 1346.00 that will be ideal for 'camouflage'-equipped traders.  Simply follow the rules on this one, because it looks prospectively like a very high-confidence play. _____ UPDATE (10:26 a.m. EDT):  In the chat room and via e-mail, I've received reports from several subscribers who shorted the midpoint, so I'll establish a tracking position for your guidance.  If you initiated the position on multilots, cover half now around 1336.00 and used 1352.00 as a profit-adjusted cost basis. A 1355.25 stop-loss is suggested until my minimum downside target for the near term is achieved: 1332.75.  Thereafter, a trailing stop suited to your temperament can be used.

The “liquidity event” is back. With stock markets around the world rising on a tide of printing-press money, IPOs, mergers and acquisitions are red-hot once again, turning corporate insiders into billionaires overnight. And -- no surprise here -- the companies that are most closely tied to the funny-money business itself are spawning billionaires the fastest of all – faster, even, than Forbes magazine can make room on its list of 500.  Just one new, hitherto unheard of paper-pusher alone, Swiss commodity-trading firm Glencore, will likely add at least six billionaires to Forbes’ roster when it goes public.  Its CEO, Ivan Glasenberg, who owns 15.8% of the company, could be worth $60 billion after the big day.  Perhaps Facebook founder Mark Zuckerberg went into the wrong business? He’s only worth a measly $12 billion at the moment, and it seems unlikely he’ll surpass Glasenberg, since Facebook, which has yet to develop a solid revenue model,  is expected to fetch only $50 billion when it goes public. In the meantime, poor cousins like General Motors continue to grind out profits the hard way – i.e., by selling their stake in financial subsidiaries that are making money hand-over-fist the new-fashioned way. Fortunately, however, some of the lucre has begun to trickle down to the little guy. The Ackerman household, for one.  We recently received a letter from Well Fargo bank informing us that they were “very pleased to bring [me] some good news!”  I knew the news was going to be good indeed, since the opening sentence was in boldface – and with that exclamation mark!!  Were they perhaps going to reward me for being a loyal customer for 30 years?  Well, yes. But my heart sank with the next sentence:  “We have lowered your annual percentage rate as noted in the table

We hold 300 shares against three June 40-May 38 puts spreads legged on for a 0.50 credit.  The stock has fallen to within inches of the 34.17 target.  I still expect a bounce from these levels -- perhaps this is it, and the target will not be reached -- but the magnitude of the rally is beyond speculation at the moment.