Dow Industrial Average

Take any dozen good reasons for being bearish right now and they still don't equal the bullishness of the chart shown. The undeniably compelling rally objective is 13085, a 4.8% move from current levels, and one can only surmise that the dusting the 12158 midpoint received on the last pullback (12/28) all but clinched a finishing stroke to the higher number. Moreover, it implies that bears shouldn't get their hopes too high even if, in the next few days, the Dow plummets 324 points to retest the midpoint support. As of now, that would signal not weakness, but a screaming opportunity to get long.  Hard to believe, really, but that's what the charts say.  _______ UPDATE (March 6, 12:06 a.m.):  The Dow got as high as 13056 -- close enough to the target to turn me very cautious.  This means, for one, that I am not taking the likelihood of yet one more short-squeeze rally as a given.  In fact, a downdraft that exceeds 12883 would create the strongest bearish impulse leg on the daily chart that we've seen in a while.

In the Rick’s Picks forum, Gary Leibowitz is a square peg in a round hole. A steadfast Obama supporter, his outlook for the economy is almost as annoying. He actually thinks we’ll muddle through 2012 without a global financial collapse and believes the U.S. economy is on the mend.  Here’s Gary in his own words, posting to the forum yesterday:  “As Obama is being bashed for his outrageous spending spree over these last three years, the economy is showing improvement across the board. The dollar has to do well in this scenario, which will place pressure on commodities. The corporate earnings picture is a bit more cloudy. Overseas exposure will certainly hurt the bottom line.” Crazy, right?   In the first place, where would economic growth even come from, given the shrunken state of America’s manufacturing sector and the death spiral globally of our former bailiwick, grotesquely leveraged financial “products”?  Factor in an apparently intractable deflation in the housing sector, and the best we could hope for in 2012 is to keep the Second Great Depression at bay for another year, right? And yet, is it possible he could be right – that 2012 will end, just as 2011 did, with no world-shaking financial catastrophe to end these tolerably hard times?  In fairness to Gary, we should note that he is not all lollipops and roses. “I am not proclaiming all is well, or that we will come out of this unscathed,” he continued in his post. “I just don’t see the Armageddon everyone is expecting.  If we do hold off a recession this year, then the odds of a severe recession in 2013 increase greatly. Real estate and other ‘assets’ will most likely take it on the chin. Deflation pressures will mount. Can’t see many winners except cash.” We’d have

It’s days like yesterday that seem to suggest the central banks could keep stocks afloat more or less indefinitely. How can shares possibly go down as long as there’s a sea of digital dollars to support institutional players with no better use for interest-free money? Actually, it took relatively few dollars to push the Dow Industrials up 260 points at the apex of yesterday’s short-squeeze.  That’s because the rally was all but over minutes after it began. Stocks opened on a gap well above Friday’s close, with almost no shares changing hands in-between.  Indeed, it wasn’t a buying stampede that added tens of billions of dollars to the value of publically traded stocks; rather, it was the premium sellers tacked on when pent-up demand, mostly from bears, exploded after a three-day holiday. With shorts caught in the ringer, why would sellers want to get in the way of the resulting melt-up? So they stepped aside. And anyone who was not long stocks when the market closed on Friday was locked out.  In retrospect, we can’t understand why we weren’t in more of a betting mood ourselves when trading wound down last Friday, the final session of the year. Betting the pass line would seem to have been a no-brainer for anyone who “knew” that nothing horrific would happen over the weekend.  As it happened, the headlines concerned arson in L.A. and the Iowa caucus. No scary new bailout plans from Europe. No tankers sunk in the Strait of Hormuz. Just routine stuff. Although popular wisdom has always said the stock market hates uncertainty, these days it would appear that nothing thrills Wall Street quite like a dull-news weekend. *** (If you’d like to have these commentaries delivered free each day to your e-mail box, click here.)

Should I mention that yesterday's 337-point rally was not impulsive on the larger intraday charts? Check out the 240-minute bars if you don't believe me. Another measly 31 points would have done the job, but it looks like the panic-stricken shorts who powered yesterday's wilding spree just didn't have it in them.  My hunch is that the rally will prove to have been a one-and-a-half-day wonder after bears have done their puking Wednesday morning. Still, because the daily chart actually is impulsively bullish, we'll have to treat the expected pullback with the same deference today's commentary has accorded Kim Jong Il.  Allowing for the most bullish scenario I could possible see over the next eight trading days, my maximum rally target would be 12760, subject to midpoint interference at 12248.

U.S. stocks showed unbridled enthusiasm yesterday for the changing of the guard in North Korea, tacking 337 points onto the Dow Industrial Average. Could heir apparent Kim Jong Eun be the Man of Peace the world has been waiting for?  It sure looked that way on Wall Street, where a wave of optimism about something fabulous swamped sellers from the opening bell. Even if the young Kim – reportedly a huge basketball fan like his dad --  merely slows North Korea’s mischievous transfer of nuclear weapons technology to Iran’s mullahs, jihadists and terrorists around the world, it would be the best Christmas present our crisis-fatigued planet could receive. Small wonder, then, that North Koreans were sobbing in the streets as they grieved the loss of their Dear Leader.  And very dear he must have been, to judge from the tens of thousands of mourners who lined up for hours to pay their respects as Kim Jong Il lay in state, ensconced in a glass-covered coffin. Was he smiling when he died?  We couldn’t tell looking at the picture below, although we won’t be surprised if a future biographer reveals that Kim, who’s name means “regal hill,” was a world-class kibitzer in private. A few churlish newscasters said the distraught mourners looked like they were putting on an act. But then, the network anchors have always had it in for the Kims, especially after Richard Nixon died in 1994 and left them with a large surplus of loathing and revulsion to expend. North Korea’s leaders were bound to be a target of their opprobrium, given the Kim dynasty’s well-known penchant for cute girls, Cuban cigars and Remy. Granted, most of North Korea’s citizens are lucky to get 500 calories of food in a given day. But is that any reason to

Does the chart below of the Dow Industrial Average make you feel bullish? Bearish? Neutral?  We’re not sure ourselves. Although we’ve been using technical analysis for nearly 40 years, the chart doesn’t speak to us. At best, it leaves us with only a moderately bullish bias for the near term  -- and a vague feeling that the meaningless price swings that have ruled the markets in 2011 could continue for longer than we would care to imagine, let alone explain  This is hard to believe, especially with so many dreadnoughts bearing down on the global economy and banking system. The U.S. is re-entering a recession that never ended for most households. China has hit the brakes in preparation for a slowdown in global trade, and the country’s real estate bubble appears to be deflating with a vengeance. Jihadists are planning naval “maneuvers” in the Strait of Hormuz. Bird flu and the bubbling Yellowstone caldera threaten us with extinction. And there is of course Europe, faced with the impossible choice of either monetizing the debts of countries that will never be able to pay them, or letting those countries go bankrupt. We think it is the latter option that will forced on decision-makers, since rich-uncle Germany understands that throwing another two or three trillion euros of debt-money at the problem will not fix it.  In any event, the decision cannot be delayed for much longer, since interest rates for sovereign borrowers are becoming increasingly uppity. For Italy, most crucially, rates are edging back toward 7% -- the extreme end of the red zone politically and economically – within days of each new phony bailout scheme hatched in Belgium. A disaster is coming, and it is only a question of when. Like a Kite in a Gale And yet, U.S. stocks continue

We got short at the top on Friday, but how long will Mr. Market let us enjoy the ride? Our vehicle, QQQ put options, nearly ran off the road on Tuesday when the Dow began the day with a 125-point rally. A pullback in the early going shaved that gain by two-thirds, but by early afternoon bulls were beating on the highs, threatening to send bears into a new round of short-covering. The pessimists got a reprieve, however, when something spooked the market late in the session, sending the Industrial Average into a 225-point dive that left it 66 points lower on the day.  It was not a session for the faint-hearted. Still, the outcome boosted the value of our put position, leaving Rick’s Picks subscribers in good shape to try to lock in a profit no matter what the stock market does as 2011 draws to an unpredictable close. On Friday, we’d actually been bullish for most of the day in anticipation of a powerful rally in the E-Mini S&Ps to exactly 1259.25, a Hidden Pivot target. With ten minutes to go before the bell, the futures got as high as 1258.50, and so we sent a bulletin to subscribers telling them to get short by buying January 54 puts for 0.96 in QQQ. This equity-based vehicle corresponds to the S&P futures and was making its high at 57.17. Although we rarely advise opening a position on a Friday afternoon, the circumstances strongly warranted it. This time, taking a gamble paid off when the new week began. Monday’s gap-down opening caused our Jan 54 puts to spike to as high as 1.25, and so we told subscribers to take a profit on half the position. Now that the selling has resumed, our goal will be to spread off our

Although the E-Mini S&P has already breached a key midpoint support slightly, the Dow has yet to confirm.  The number we'll be monitoring is easy to remember -- 11111 -- and if it is breached decisively or on a closing basis for two consecutive days, look out below, since that would have scary implications for the broad averages. Indeed, the 'D' target corresponding to it is 9937, fully 1295 points below these levels. _______ UPDATE (9:41 a.m. EST):  A short-squeeze gap that no one will have gotten to trade has yet to achieve bullish impulsiveness even on the lowly 15-minute chart.  That would take a print at 11602.30, so let's see whether algo-driven machines can muster the neccessary enthusiasm.  If so, it will signify...nothing.

The Dow's failure, after two attempts, to get past the 11717 peak recorded on September 1 is bearish on its face, but technically buyers can keep trying with no penalty as long as the pullbacks don't 'go impulsive' on the hourly chart.  That they would do, albeit only mildly, with a print today below 11326;  however, a feint beneath the 11051 low from a few days earlier would make for a more impressive jolt to the bullish argument.  Notice that yesterday's selloff doesn't look so bad on the Indoo's hourly chart -- not that it did on the E-Mini chart either. But rather than speculate on what this might mean, we'll simply set a screen alert at  11050 to warn of potentially significant trouble.