August 2011

The chart included with today's Industrial Average tout shows a bearish pattern emerging that yields a minimum downside target of 9542.  That's about 16 percent below these levels -- presumably just a start on the Big Bear.  Its 'D' sibling lies at...6209!

The weekly chart shows how yesterday's plunge created a bearish impulse leg by exceeding the required internal and external lows.  The price bar itself doesn't look like much in the context of this very big picture, but it is ominous nonetheless that it has followed a bull cycle that failed to surpass the 13187 peak from May 2008.  By definition, that means the entire Mother of All Bear Rallies from the 2009 low is merely corrective relative to that peak.  The resulting, bearish ABCD pattern gives us a Hidden Pivot midpoint to use for a minimum downside target: 9542, representing a further fall of about 16 percent. To be sure, there are lesser uptrends yet to play out against the larger, bearish tableau; however, we now have an especially compelling reason to look for ways to get short at their respective midpoints and 'd' targets.  Camouflage, anyone?

An interesting day, for sure. But a surprise?  It shouldn’t have been, since even the Guvvamint’s statisticians and spinmeisters seem to have noticed that The Great Recession is back with a vengeance. Under the circumstances, anyone so stupid as to be loaded to the gills with stocks deserved the full brunt of yesterday's devastation.  The stock market’s collapse surely didn’t take us by surprise. The night before, under the headline “This Rally Is….Doomed!” we’d disseminated the following alert to subscribers: “The strong bounce off yesterday’s apparently oversold low is a fraud, and it is doomed, so we’ll have a very strong incentive to short every… rally target we can find…”  We’d also made the following declaration in commentary published here yesterday:  “Lest any of our own readers be shrouded by the fog of the Mainstream Media’s coverage of the financial markets and global economy, we’ll state for the record that the technical evidence is overwhelming that the Mother of All Bear Rallies begun in March of 2009 is over.” If we sound pleased that the market appears, finally, to be having a massive heart attack, it’s because stocks for too long have been the captive of quasi-criminal forces that could charitably be described as pond scum.  The good news is that when the Dow is trading 10,000 points lower in a few years, no longer doing the bidding of high-frequency traders, mountebanks, thimble-riggers, Murphy men and arse bandits, that will set the stage for a true bull market that will run for a generation. At that point, with “money” no longer available interest-free and in practically unlimited quantities for rampant speculation, stocks will rise once again on their individual merits, savings will have a purpose, and capital will seek out its most productive uses. We hope we’re around when all

On Thursday morning, with the stock market collapsing, we conducted another of our live impromptu webinar sessions for Rick's Picks subscribers. As stocks were plummeting, we looked for trade entries and potential swing lows in a number of vehicles, including Gold, Crude Oil and the E-Mini S&Ps. Check out this video if you want to see Hidden Pivot Analysis at work, turning the panic, fear and confusion of most everyone else into valuable information that was easy to use.

The strong bounce off yesterday's apparently oversold low is a fraud and it is doomed, so we'll have a very strong incentive to short every 'd' rally target we can find in the days ahead using very tight stops.

A new rally target at 602.99 has emerged, somewhat lower than one previously identified here, and we can use it as a minimum upside projection for the near term.  The trek has hardly been easy, but the Gold Bugs index would be telegraphing a fresh burst of energy if it can close for two consecutive days above 572.62, the Hidden Pivot midpoint associated with the target.

DaBoyz will try to milk every last drop of panic from this short squeeze, but I doubt it will go very far. Putting aside what I "think" or expect, we'll use the twin external peaks at 1285.00 to warn if the so-far hoax-of-a-rally is taking on a life of its own, in Frankenstein fashion. A print just a single tick above 1285.00 today would put bears on the ropes,  probably, until at least week's end.

The 42.290 target given here earlier remains our minimum upside objective for the near term, but anything above it would indicate 42.690, and thence 44.285.  Each of these Hidden Pivots can be used to benchmark the rally a step at a time, since a breach of one hidden resistance by more than a few ticks would portend more upside to the next, at least.

The December futures made good progress yesterday toward a Hidden Pivot at 1728.00 that is our minimum upside objective for the near term. Trading possibilities for Wednesday night were limited, but I've sketched out the best opportunity we might see in the hours ahead for a camouflage "buy."  If the rally in progress around 9 p.m. EDT pops above peaks #2 and #3  and then pulls back without having exceeded #4, that could set up the B-C leg where a trade could be initiated. Its immediate potential would be to 1680.30 (30m, A=1654.40 on August 2 at 9:30 p.m. EDT).  Alternatively, there's a concurrent correction that projects to 1654.20, but I don't recommend bottom-fishing there due to its close proximity to the August 2 low.