June 2012

We're looking more and more aggressively for low-risk opportunities to get short, since it's possible that stocks have entered a bear market.  This equity-based (as opposed to futures-based) vehicle is optionable and highly liquid, so that, for the benefit of novices and experts alike, I'm going to start stalking it as we are already doing with the QQQs. For the moment, however, we won't attempt to impede it, since yesterday's spike just before the bell exceeded the 'D' target of the minor pattern shown. If still higher prices impend as we might therefore expect, the shortable 129.75 'D' target of the larger pattern begun on June 5 is a logical minimum price objective.  Its midpoint sibling at 126.80 is close enough to yesterday's high to yield an enticingly shortable top, but it is not my practice to establish short positions ten second before the final bell.  If the high had been achieved with 30-60 minutes remaining in the session, tough, I'd have said, "Short away, camouflageurs!" 

[From his new headquarters in a fashionable district of Shanghai, our friend and frequent contributor Mario Cavolo, a communications consultant, recently surveyed the passing parade.  Bullish thoughts on the global economy ensued. For, who can doubt that the dawning Asian Century will help balance out the difficulties that seem likely to hobble the economies of the West? For an uplifting, long-term view with a global perspective, read his essay below. RA] Does it not occur to any pessimist that a massive region of the world is expanding, not contracting, and that this statistical fact portends well for the future demand of all "stuff" across the globe? While assuredly not discounting disturbing global financial and economic pressures, pessimists and permabears seem to relish discounting the powerful, upward expansionary forces across the global economy that also clearly exist. Here in Shanghai, I now sit in the new upper middle class mall called Kerry Parkside, where we have a marketing location for our various services. Forget the fact that prices are annoyingly high and that the mall is still packed on the weekends. Let's consider right now only of this part of the story which gives us a glimpse of the future: Observing every family that enters this mall, every woman I see is either with a baby/toddler in tote or pregnant. Did I say “every”? Apologies. Of course not, and I readily confess such an exaggeration. Yet it boggles my mind to note how many pregnant women and under-three-year-olds are here, appearing very much as the rule, not the exception. The same exact observation is easily made across China's twenty or so major urban centers, now totaling a population well over 300 million family dwellers. Ladies and gentlemen, embrace and gladly welcome the greatest baby boom in history, unprecedented in world history,

I've updated a recommendation to short GLD with a fresh chart, but as of early Wednesday evening there was nothing in the three-minute-bar picture promising to make this gambit easy.  My hunch is that the ornery price action is telling us GLD wants to move higher for now, not lower. Whatever the case, traders will not go far wrong doing their business on charts of 5-minute degree or less.

The minor bullish pattern shown has the potential to push the September futures to within pitching-wedge distance of two 'external' peaks on the hourly chart. The implication is that a relatively modest thrust could generate the kind of robust impulse leg that will put the futures on-track for a test of June 3's high at 152^19.  Camouflageurs looking to get long will have three peaks to play the in-betweens, as well as numerous smaller peaks on charts of lesser degree. _____ UPDATE (June 17, 8:52 p.m. EDT):  After peaking just three ticks from the 150^04 target shown in the chart, the futures have gapped lower Sunday night, denying us an opportunity to get short via camouflage or otherwise.  No further action is suggested for now.

Index futures were in a dirge Tuesday night, but if they come to life we should bring a bearish bias to any trading opportunities that follow.  The weekly tutorial session will be held as scheduled, but stay tuned for an e-mail alert concerning an impromptu online trading session if the markets are moving.  To receive such alerts, simply check the 'E-Mail Notifications' box on your My Account page.

Our #1 market bellwether failed to create a bullish impulse leg on the lesser charts with its last leap, buttressing the evidence that April's 644 high may endure for a long while.  Bulls and bears have been dueling since, hinting that summer is likely to bring more tedium, not exuberance. If you hold a long-term position, consider selling 'strangles' against it, since they are quite rich. Selling the July 560 put/590 call, for instance, would fetch about $2700, establishing a theoretical profit zone stretching from 537 to 617 for the options portion of the position.

The futures ended the day with an impulsively bullish thrust on the hourly chart that night owls may be able to leverage. The approach called for is perhaps the opposite of a 'timed' buy-stop, since the waiting game will take place before we get long rather than after.  In this case, I'll suggest waiting for a very minor, uptrending abc pattern after 'X' has been triggered relative to the larger pattern shown.  Essentially, along the route of B-C, you will be looking for impulse legs on charts of 3-minute-degree or less.  The later the signal occurs Tuesday night, the more likely your success, since we are always favored when our competitors have grown bored and inattentive to opportunity.  Like to learn how to reduce the risk of a trade using the Hidden Pivot Method? Click here.

New life for bulls seems remote at the moment, since the July contract would have to climb all the way to 31.470 to challenge an 'external' peak on the daily chart. More immediately, the futures remain in a duel that suggests no quick end to the tedium that has characterized price action since mid-May. The somewhat gnarly pattern shown implies that the next thrust could reach 30.605, but the futures will first have to overcome the midpoint resistance at 29.260.  If this Hidden Pivot is surpassed, camouflageurs should seize the advantage by buy-stopping themselves into a long position at the first available 'X' of minor degree on charts of 5-minute degree or lower.

With the exception of June 1's bullish wilding spree, price action during the last month has produced precious little evidence that Gold wants to move higher. That could change overnight, of course, but the burden of proof will remain on bulls for now.  Most immediately, they'll need to leverage yesterday's close above the midpoint resistance of the pattern shown. The breach portends more upside over the near term to its 'D' sibling, 1653.30, at least, but what happens next is what matters.  As always, if a 'D' target -- especially one that will have been two weeks in coming, as this one has -- gives way easily, buyers will have a green light to push this vehicle to the next major Hidden Pivot.  FYI, "next" in context means the 1744.30 midpoint resistance of the daily-chart pattern A=1491.60 (7/1/11), B=1921.50 (9/6/11), and C=1529.30 (5/16/12).