June 2012

Buyers took a well-deserved day of rest yesterday, giving up 25% of Friday’s explosive, $87 gain. What we should like most about this surge is that, before buyers were done, they surpassed an intraday high that lay a single tick above a look-to-the-left peak at 1631.90 recorded on May 8 (see inset).  We’ve seen Rockie’s outfielder Dexter Fowler do something similar, making it to third on a long fly ball when most runners would have held up at second.  Concerning the peak, although it is tiny, it is a fully formed ‘external’ high whose breach suggests that buyers are feeling feisty, presumably with enough energy to uncork a C-D follow-through thrust later this week. In the meantime, there may be an opportunity for a camouflage entry at these levels. Notice on the hourly chart that there’s a peak at 1629.70 recorded Monday at around 2 a.m.  Because it lies 2.30 points beneath the 1632.00 intraday high, there’s room for an impulse leg to pull back without having broken out above the ‘marquee’ high that most everyone else will be watching.  A ‘B-C’ retracement from somewhere in-between the two peaks would create an enticing set-up, with entry at the ‘X’ trigger via a ‘timed’ buy-stop.  This is potentially an easy play for those who have been practicing what they learned at the Hidden Pivot Webinar.  If you’re in the chat room when the trade is signaled (perhaps in the dead of night), I would encourage you to point it out for the benefit of all.

It’s time we looked in on our favorite bellwether, Apple, which is arguably acting like a world-beating company whose shares have entered a bear market. We shouldn’t be too hasty in ruling a  TKO, though, at least not yet, since the stock did precisely achieve the ‘D’ target of its most recent corrective rally. As you can see, despite the stock’s occasionally wicked volatility, Apple can be quite obedient when confronted by a good, clear Hidden Pivot. Notice as well that although the correction provided a superbly camouflaged breakout and three single-bar coordinates, the trade would have been hard to execute because the little sonofabitch gapped through the ‘x’ entry point. Going forward, we should keep in mind that, as well wrought as this upward retracement was, the ‘D’ high did not exceed any externals as we require to refresh the bullish impulsiveness of a chart. Still, the implications will not be bearish until such time as a down-leg takes out the 552.21 low from May 23. Calling the turns confidently while dramatically reducing trading risk is easier than you might think.  Want to learn how? Click here for information concerning this week’s Hidden Pivot Webinar on June 6-7.

Notice on the 240-minute chart (inset) that there are no fewer than four ‘external’ peaks that a point ‘B’ high could get between before pulling back to set up a long entry at ‘x’. This could spell opportunity for Pivoteers, since no rally-leg peak that falls shy of May 18’s 28.895 will be read as a breakout by our competitors.  I’ve highlighted a similar situation today in August Gold, so be sure to study this chart if you’re hankering to jump on either vehicle

Although we have come to expect every program created, touched or tweaked by the fine hand of government to eventually bog down in  scandal, waste and bureaucratic inertia, the Obama administration has outdone itself with the student loan program.  Recently it came to light that this trillion-dollar boondoggle is producing more and more borrowers who fail to graduate.  Not only are they deeply in hock when they leave, they also lack the college degree that might enable them to land the jobs needed to pay off their loans. Fully 30% are dropping out these days, compared to less than 25% a decade ago, according to think tank Education Sector. Even worse news for taxpayers is that dropouts are far more likely to default on their loans, falling behind at four times the rate of graduates. Over the years, the Federal Government has become increasingly immersed in the student loan program, slowly pushing private lenders out of the picture. Loan rates are now set by politicians who in an election year have been tripping over themselves in their eagerness to pander to students and their financially strapped parents. Still worse is that Obama has promised to loosen the terms of repayment to the vanishing point, and to forgive debt so generously as to all but encourage borrowers to skip out on their loans.  There is also an election-year-stimulus factor at work, since few conduits for pushing money into the economy are as efficient as those that funnel cash to the “customers” of colleges and universities.  The schools have responded as we might have expected, adding country-club amenities for students while ignoring dramatic shifts in the job market that have made the humanities degrees they churn out all but worthless. The schools have also worked diligently to weaken for-profit competitors such as

The breach of an important midpoint support at 1272.00 has bearish implications for the intermediate term, but the immediate picture is probably no worse than neutral, since the futures turned higher from four points above the 1268.25 downside target of a lesser pattern (see inset). On balance, we'll back away for a day, although camouflageurs are encouraged to go where other traders might fear to tread. Bulls would need to push this brick to 1296.75 today to show a spark of life.

I arrived home from New York this evening to find index futures and bullion still noodling around six evidently tedious hour later.  I'm planning on holding an impromptu trading session Tuesday morning, so perhaps we'll be able to catch a ride then.  If you want to be notified when the session is about to begin, select 'E-Mail Notifications" on the My Account page.

Gold's powerful rally on Friday cancelled our large bearish patterns, and the bullish impulse wave is still in progress as we go to press.  The strength of the move presumably gives the gold price upward momentum which is not exhausted yet, so traders should probably use smaller patterns to play the long side for now.  We will be looking for a large-scale bullish pattern to emerge on the next pullback of $25 or more.  1545.50 will be our 'A' point, and it is a classic.  As far as larger bearish patterns are concerned, it won't take much more upside to cancel 1674.30 as an 'A', which would leave 1797.70 to play the role.  A pattern originating there will need a $67 to be confirmed and twice that to reach its midpoint, not something gold seems in a mood to do any time soon.  (Posted by Doug “harry” McLagan)

I'll be returning to Denver Monday after 18 days on the road.  Over the time I've been away a likely bear market has shown its claws. There will surely be many opportunities to profit in the months ahead from both the long and short side, but my focus most immediately will be on intraday setups that would allow us to get short with as little risk as possible.  If you'd like to stay on top of real-time trading opportunities that might result, I recommend signing up for 'E-Mail' notifications on your 'My Account' page.

Last week's dip beneath a 194.84 midpoint implies more weakness is likely, presumably to the 191.42 'D' target of the pattern shown. Using camouflage on the 5-minute chart or less, traders should attempt to short any rally that gets within 5-10 cents of the midpoint.  Bottom-fishing at 'D' is also suggested if you are able to reduce theoretical entry risk to 12 cents or less for each round lot traded. _______ UPDATE (May 31, 12:46 a.m. EDT):  The whoopee cushion price action this week has put into play a lower target at 188.03 that would become a lead-pipe cinch if the stock closes beneath its p sibling at 193.05. _______ UPDATE (June 3, 5:10 p.m. EDT): The low of Friday's nasty selloff came within 57 cents of the 188.03 target flagged above. It remains viable and can be used by Pivoteers for cautious bottom-fishing, but if the hidden support fails we'll be looking at more slippage over the near term to at least 182.36 (240m, A=208.92 on 5/3, and B=193.20.) _______ UPDATE (June 7, 9:59 a.m. EDT):  Off a low of 187.00, Big Blue has launched into a take-no-prisoners short squeeze marked by gap-up openings on the last two days. The bigger picture still looks bearish and will remain so until such time as buyers push this vehicle to 198.30.  For the moment, however, we'll back away.