Bears were getting battered senseless when last week ended, so expect them to be buying with both fists to cover short positions when stocks get rolling on Monday. This will not preclude the possibility that DaBoyz will manipulate stocks lower Sunday night in order to shake out sellers still nervous about Washington’s dithering.  However, the supposedly smart money will be betting in any case that a deal is inevitable and that the market will roar higher when it is announced.

From a technical standpoint, trends both minor and major are in synch to drive stocks higher, presumably toward either of the two targets shown in the chart. Notice that the midpoint resistance of both patterns gave way easily, and  that each has since become a point of consolidation. This has shortened the odds that the lower of the two rally targets will be reached.

Looking beyond this, my concern is that the political currents that have pushed stocks hither and thither in recent weeks will turn out to have been a red herring. Many investors are bound to assume that a temporary peace in Washington will clear the way for a stock market rampage to who-knows-how-high.  If so, this attitude would beautifully ‘set the hook’ to trap bulls at the top. My gut feeling is that Obamacare alone, effectively a huge new tax on the middle class, will suffice to turn an already moribund economy into a deeply recessionary one. If so, with stocks just a short distance from all-time highs, investors are manifestly unprepared for the gathering storm.

More immediately, traders working the night shift should ignore the news from Washington and look to bottom-fish whatever sleazy shakeout occurs ahead of Monday’s opening bell. If you use the camouflage technique to get long, watch on the 15-minute chart for a bullish reversal from either p or D of the corrective pattern, and for an entry trigger on charts of perhaps 5-minute degree or less. _______ UPDATE (1:44 p.m. EDT): The futures have in fact reversed and rallied 20 points from a 1680.75 low engineered by DaBoyz Sunday night. Using the 3-minute chart (see inset), camouflageurs could have gotten long for the entire ride at 1685.50 around 8:39 p.m. However, they’d need to have dealt a premature signal at 1687.50 that had occurred 21 minutes earlier and which resulted in a stop-out beneath the initial point ‘C’ low, 1683.75. _______ UPDATE (10:10 p.m. EDT): Because stocks have been moving higher on rumors of an accord in Washington, we should regard a further rally on the actual news with a gimlet eye. A modest rally to at least 1748.00, the Hidden Pivot target of the pattern shown (see inset, a new chart), seems assured, and so our bias for the near-term should be bullish. However, the target is a shorting opportunity via camouflage in any case, and we should hold our further enthusiasm until such time as it has been decisively exceeded.  _______ UPDATE (October 15): Informed opinion now holds that no deal is coming before the weekend, at least. If so, look for the action to turn ugly for the next day or two. _______ UPDATE (October 16, 11:55 a.m. EDT): Today’s sharp rally has brought into focus a 1718.50 target, which by the way is short-able.  If the futures get by it easily, however, a larger pattern targeting 1733.25 will be in play. That number is corroborated by this morning’s precise stall at the 1707.00 midpoint pivot of A= 1647.75 (10/9); B=1700.25 (10/11); and C=1680.75 (10/13).