October 2011

Thursday's powerful rally in equities left our active patterns in the dust, and a new one that emerged after the day's high is under threat as the futures drift lower in night trading.  The bull trend which launched off of the October 4 low still lacks "structure" in that the pullbacks along the way are too small to serve us as BC legs.  In other words, the S&P500 is still impulsing upward 210 points later.  This move will become serious business if and when it gets past the highs of early and mid-2011, less than 100 points further up.  The small pattern that emerged yesterday targets 1303.00.  Its midpoint is half a point below "B" (the rally high) and therefore not well hidden.  Traders shorting 1303.00 should use a very tight pair of orders.  If the "C" point at 1274.50 is touched or surpassed, the pattern will be voided.  This is shown in the attached chart, which also illustrates why we all should have made a killing yesterday.  (Posted by Doug "harry" McLagan)

Shortly after 3 a.m., the E-Mini S&P was steaming toward a 1278.50 target identified in today's tout, having  turned its sibling 'p' midpoint at 1247.50 into pulp.  We can only infer -- to borrow Ronald Reagan's line -- that it's 'morning' in Europe.

Like December Silver, this vehicle is struggling to push past a midpoint resistance following Tuesday's impulsive thrust.  The pivot lies at 1726.15, with a corresponding 'D' target at 1756.70.  The futures have already traded $2.60 above the midpoint, however, making them a somewhat better bet than Silver to extend the rally at least to 'D'. If that happens, with Gold pulling a recalcitrant Silver higher, it would generate a robust new impulse leg on the hourly chart by exceeding the 'external' peak at 1751.80 recorded on September 23.

The futures extended Tuesday's A-B thrust without a false start, implying there's enough power behind this rally to take Silver higher even though a lot of bulls are piling on.  Most immediately, the rally has stalled at the 33.920 midpoint pivot of the pattern shown, but once above this resistance, it would become an odds-on bet to reach its 'D' sibling,  34.935, at least.

[John Skerencak, known to denizens of the Rick’s Picks forum as John Jay, is outraged by a Senate bill that would effectively sell visas to foreigners willing to buy expensive homes in the U.S.  The story, reported recently in the L.A. times, is linked below, and you’ll see in the comments it provoked that he is not the only one who thinks this deal stinks.  RA] Selling U.S. visas to prop up the real estate market? You’ve got to hand it to the banking and real estate lobbies, they never give up.  They always have a new scheme in the works. Here’s the story, from the October 20 edition of the Los Angeles Times: “American consumers and the federal government haven't been able to bail out the sinking U.S. real estate market. Now wealthy Chinese, Canadians and other foreign buyers could get their chance. Two U.S. senators have introduced a bill that would allow foreigners who spend at least $500,000 on residential property to obtain visas allowing them to live in the United States.” And there you have it. You can read the article for further details, but the bottom line is that it eliminates the old requirement that a foreigner invest money to create jobs in the USA to get a residence visa. As if that law were not already demeaning enough to America. My synopsis:  You need only pay $500,000 or more in cash, and buy at least one property worth at least $250,000 to live in, and the rest of the money can be used for rental properties.  This legislation proposes a list of regulations that are unenforceable and will never be checked in any case. Think about SEC enforcement of securities regulations: Showcase the law, but don’t enforce it once it has been enacted. You can

A big shout-out to subscribers down under as we cover the Aussie and New Zealand dollars in today's edition.  The mid-2011 highs in the Australian dollar completed a multi-year pattern whose BC leg was the selloff of 2008.  After the July 2011 high, the Aussie fell by as much as 15% and then recovered substantially.  Within the CD leg of the multi-year pattern are several versions of a new impulse leg that peaked in July.  The October 4 low looks a lot like a "C" point, which would mean that higher prices are coming.  If the Aussie needs to consolidate a while longer, we might expect a short-term peak to come at 1.0894.  This is the midpoint of an active pattern on the weekly spot market chart, with the "A" point in May of 2010.  Futures traders should keep one eye on the spot market and look for a camouflaged opportunity to short if and when the spot price gets close to the pivot.  The New Zealand dollar has not reached its multi-year "D" target, which we reckon to be 0.9131 based on the monthly spot FX chart.  A pattern on the weekly chart jumps out at us due to its three sharp coordinates, with a midpoint at 0.8334 and a "D" target at 0.9201, as pictured in the attachment.  (Posted by Doug "harry" McLagan)

News out of the Eurozone has propelled S&P futures upward and through a midpoint pivot whose sibling "D" target of 1278.50 is now in play.  The stock-market rally of early October cancelled the pattern whose impulse wave was the memorable midsummer plunge, and the relentlessness of the recovery meant that it lacked the kind of structure that hidden pivotry thrives on.  But the up-and-down trading of the last two weeks has made the ES charts interesting to us once again.  The 1278.50 "D" target comes from a small but elegant pattern that formed in the recent volatility.  A larger bullish impulse wave began at the October 4 low (it didn't pause long enough to give us a one-off A).  But all impulse waves must come to an end, and where better to do so than at 1278.50?  Traders can short that well-hidden pivot at 1277.75 or perhaps a tick or two higher, with a stop not below 1279.25.  (Posted by Doug "harry" McLagan) _______ UPDATE (2:00pm EDT): The futures spent half an hour deciding whether to reverse at 1278.50 and finally chose to push higher.

We took a different tack on learning, retro-engineering gold’s chart so that we could “trade” it without knowing how things would turn out. It helped that gold futures were approaching a breakout threshold, since this create volatility swings with many impulse legs, both bullish and bearish. You may be surprised at what we found, as well as at the subtlety of the lessons we were able to learn.

The bullish pattern in December Gold that I pronounced "good enough for government work" is evident in this vehicle as well and projects to 35.870, a Hidden Pivot resistance. For trading purposes, we can start with the impulse leg at the right-hand edge of the chart. It has achieved impulsive status in night trading, exceeding a key peak at 33.585 recorded on September 27. My gut feeling is that the first point 'C' will be stopped out in the manner shown, so caution is advised if you are using "camouflage" to get aboard.