January 2012

Amidst a presumably purposeful interlude of tedium, we remain focused on unexciting “external” peak at 1645.80 as the number bulls must beat.  However, as noted here earlier, bullish confidence would take a much bigger leap if the impulsive leg that spears 1645.80 keeps going to 1681.80 before it runs out of steam.

In tonight's commentary, I described the stock market as patiently biding its time in gluttonous anticipation of news sufficient to reignite the massive short-squeeze that kicked off the New Year.  Or so it would seem. Sentiment is so ridiculously bullish right now as to reflect the gutlessness of sellers.  They'll return with a vengeance one day soon, for sure. But for now, DaBoyz are unwitting instruments in fulfilling a Hidden Pivot rally target at 1296.75 given here earlier.  They've spent the last five sessions playing toe-sies with the target's midpoint sibling, 1278.50, doubtless unaware that such an impediment even existed. Night owls should look for camouflage on the 10-minute chart, where a low-risk long was triggered about two hours ago at 1278.00 (A=1275.00, B=12799.00, C=1277.00). You might have to babysit the position overnight, however, since the futures look skittish about breaking out to new highs without help from the army of fools who will clamber aboard at the opening bell. Want to learn how we use Hidden Pivots and “camouflage” to reduce entry risk to relatively small change? Click here

There were signs yesterday that although Americans went deeper in hock to get through the holiday season, their dietary habits were at least improving somewhat. In separate news items, it was reported that  installment debt jumped a whopping 9.9% in November, while the company that makes Twinkies and Wonder Bread had filed for bankruptcy. Based on the news, dietitians probably had more cause for optimism about the state of the Union than investors.  Whatever the case, neither item had much impact on Wall Street, where stocks continued to patiently bide their time in gluttonous anticipation of news sufficient to reignite the massive short-squeeze that kicked off the New Year. Concerning the borrowing binge by consumers, it was the biggest jump since November 2001, when they economy started to bounce back from the 9/11 attack.  The data did not include mortgage borrowing, just revolving credit for things Americans buy with charge cards, but it left no doubt that the buy-now, pay-later attitude that has buried the economy with debt is alive and kicking after more than three years of hard times. The banks that were the source of this credit could be likened to rent-to-own furniture operators, since they know that many of the borrowers will find themselves on the ropes when the bills come due with a 24.99% interest charge tacked on. Still, if it provided an uptick for retailers, who’s to quibble? *** (If you’d like to have these commentaries delivered free each day to your e-mail box, click here.)

No surprise, but the Dollar Index is looking quite frisky Sunday night.  Since this has significant implications for all else that we trade and monitor, you should have a close look at Monday's tout.

A  feisty dollar has passed a key test Sunday night, gapping through an important peak at 81.44 recorded 13 months ago. The next impediment is 81.86, the Hidden Pivot target of the pattern shown. The target is sufficiently compelling that we should expect a tradable pullback from it, but if DXY gets past it easily, it would lend weight to the very bullish outlook we've taken on the dollar.

March Silver spent the week backing and filling following the 14% rally that has kicked off the New Year.  Remaining patient is our only option at the moment, but we can still use the 30.215 'external' peak shown in the chart to tell us when mere noise is starting to sound more like the fearsome snort of a resurgent bull. Camo traders should stick with micro-risk plays on the 5-minute chart, since this vehicle has been creating new point 'C' lows as though every silver trade out there is all too eager to buy.  Want to learn how we use Hidden Pivots and "camouflage" to reduce entry risk to relatively small change? Click here.

The week of flatulence we just endured argues against going out on a limb with an exciting prediction, so let's stick with the unexciting "external" peak at 1645.80 as the number bulls will have to beat before they can crow.  Bullish confidence would take a much bigger leap, however, if the impulsive leg that spears 1645.80 keeps going to 1681.80 before it runs out of energy.

What looks like a conventional double top on the daily chart is actually a bullish impulse leg that projects to 1296.75.  The midpoint Hidden Pivot resistance associated with that number lies at 1278.25, and we should infer that a close above it would make a follow-through to the target an odds-on bet.  More immediately, because the pullback from Friday's very nasty bull-trap high offers no particularly promising spots for bottom-fishing., I'll suggest looking for a camouflage opportunities based on ABC rallies on the one-minute chart.  We're zooming down all the way here because, as of around 9:13 p.m. Sunday night, I could find no camo opportunities on the two-minute chart.

[Our friend and frequent contributor Douglas Behnfield thinks too many investment advisors are looking for the same thing in 2012:  rising stock and commodity prices, a weak dollar, rising interest rates and a bottom in the housing market. They’ll be wrong on all counts, he says. Instead, the enviable winning streak of those holding Treasury debt will continue.  A financial advisor and senior vice-president at UBS in Boulder, Colorado, he sent the following New Year’s message to clients last week. RA] 2011 was a confusing year from start to finish on Wall Street and the arrival of 2012 is not offering much relief. Today the popular message is that the economy is getting better in the U.S. and problems abroad can be overcome. Recession has been avoided and “escape velocity” will be achieved in the second half. Our economy can “decouple” from Europe and some of the big developing nations that have seen their economies slow such as China, India and Russia, now that they have run into trouble. Most economists and stock market strategists seem to have cut and pasted their 2011 forecast into their 2012 forecast. (How is that for the pot calling the kettle black?) But the concerns that clouded the outlook a year ago only seem to have gotten deeper. The positive messaging is focused on the following: The politicians will kick the can down the road and therefore avoid the kind of austerity that could derail the recovery. The Fed will engage in more quantitative easing (a euphemism for money-printing) if the economy or the stock market falters. Interest rates and inflation have nowhere to go but up, so the least attractive place to put your money is in the bond market. That is, unless you keep the maturities short and stick with “spread product”