ESH16 – March E-Mini S&P (Last:1919.00)

Denizens of the Rick’s Picks chat room are angrier, more despairing and more confused than I’ve seen them in a while. Although I hesitate to go against the well-grounded pessimism of so savvy a group, gauging the intensity of subscribers’ mood swings can sometimes be useful for sorting out the stock market’s increasingly vexatious ups and downs. Currently, the broad averages are in their fourth day of a vicious short squeeze, with no clear top in sight. All hell could break loose, technically speaking, if the S&P futures were to pop above 1940.00 (see inset), a key peak within the large, bearish pattern shown. That pattern was pointing much lower last week, when, for reasons unknown, sellers turned tail and dove for cover. The pattern, as well as the bears who shaped it, will be chop suey if 1940 gives way, as seemed likely at Wednesday’s close.

On the other hand, a spike into the blue could conceivably exhaust bears, fulfilling the one condition that is absolutely necessary for a hellacious downturn. I had assumed that a push above 1940 would all but ensure a test of record highs near 2100. Maybe not, though. If a spike that falls well short of that mark — say, to around 2025-2040 — were to occur on a Friday, that could set up a Sunday night surprise, catching bulls and bears alike with their pants down. Stocks in Europe and Asia would need to be falling hard to begin with, but those markets are just as full of hot air as ours and ready to topple. All of this is speculative, of course, but I offer it as food for thought — and as a reason for bears not to give up just an inch shy of possible vindication and redemption._______UPDATE (February 19, 12:59 a.m. EST): Shorts had an opportunity to catch their breath yesterday when the futures ended the day on a moderate selloff rather than a tick or two off the intraday high.  I won’t hazard a guess as to what freaky Friday might bring, but the analysis provided above still stands.