The futures obliterated my 1951.00 rally target yesterday in pre-dawn trading, telegraphing the power of the move that was still to come. And now what? We should put aside Hidden Pivots for the moment and focus instead on the peak at 2011.75 that was recorded on September 17. It is by now magnetic, but it is likely to become dead meat by Tuesday’s close or early Wednesday. It represents the highest high recorded since Black Monday’s plunge. We can refrain from using that term again, by the way, since the presumptive distribution that has unfolded since has gone on for long enough that it has acquired more technical importance than the August selloff itself.
When stocks struggle this hard to go lower, it usually means they will eventually take the path of least resistance and go higher. Assuming this holds true, as we should expect, look for a test of the all-time highs made back in July. To bring that about, the next logical step would be the creation of a new, bullish impulse leg on the intraday charts. That would require a thrust exceeding the 2020.25 ‘external’ peak labeled in the chart. Traders should take note of this benchmark, since any pullback from just above it it could afford a low-risk opportunity to get long via ‘camouflage’. We’ll want to short this vehicle aggressively if it achieves new record highs, since they are extremely unlikely to be confirmed by new highs in the NYSE advance/decline line. This ‘breadth’ indicator of market strength signaled the start of a major bear market last April, and new highs are not apt to change that. _______UPDATE (9:31 p.m. ET): Moderate selling left a weak corrective pattern at day’s end that you can bottom-fish with a 1958.25 bid, stop 1957.75. The trade will remain valid only if the futures don’t exceed c= 1965.50 first. The other coordinates for this pattern on the 10-minute chart are a=1974.75 (3:40 p.m.); and b=1960.50 (6:10 p.m.). A breach of p=1958.25 would hint of more slippage to D=1951.25.