For weeks, as the correction from the August 24 lows has unfolded, each bullish impulse leg on the hourly chart has been answered by a bearish one. This is what I call dueling impulse legs, and it implies that uncertainty could continue to fester for longer than either bulls or bears might imagine. Will yet another month pass with no net loss or gain in the broad averages? It’s difficult to think this could happen, especially considering there are so many things wearing on investors’ nerves. My gut feeling is that their worries about the Fed will turn out to have been misplaced and that the central bank’s do-nothing policy will continue more or less indefinitely. Would that be bad for stocks? Good for gold? Who knows?
From a technical standpoint, the futures still look like a good bet to fall at least to the 1875.50 midpoint pivot shown in the chart. That would equate to a Dow decline of about 300 points, which would be no big deal. Regardless, traders should plan on bottom-fishing at that price with a very tight stop-loss. They should also be aware, however, that a decisive breach of the pivot could be telegraphing a further fall to the 1739.25 target with which it is associated. More immediately, the 30-minute chart holds promise for bottom-fishing at 1902.75, or at 1895.50 if any lower. The coordinates needed to find those numbers — respectively a p2 support and a d target — are: 1940.00 on 9/25 at 2:30 p.m. EDT; b=1910.25 at 3:30 p.m.; and c=1925.25. _______ UPDATE (9:15 a.m. EDT): The 1902.75 downside target flagged above missed the exact low of last night’s 16-point dive by 1.00 point. For your information, a ‘camouflage’ entry could have gotten you aboard a lucrative and relatively relaxed trade around 6:46 a.m., at 1905.50 (30-second chart: a=1903.75). Notice that the a-b impulse leg is a weak one, having failed to surpass a second prior peak. There are two single-bar coordinates in the pattern, however, and that’s enough here to warrant a try. Indeed, it may be the best chance we’ll get today in this vehicle, which is over-traded, over-scrutinized, over-algo’d and far too popular with machine traders to offer easy pickings. _______ UPDATE (10:19 a.m.): And down we go again — presumably, and just for starters, to the 1875.50 target billboarded above. Incidentally, when I say that a target is a “good bet” to be reached, I mean to imply that you should short the bejeezus out of every rally that reaches a clear Hidden Pivot target. Still better is to be long on the rallies, building a profit cushion that will allow you to widen your stops when you get short.
