Dow Industrial Average

On Wednesday the Indoos poked marginally above a key peak at 25,908 recorded in December. This would likely have caused a multitude of technical traders and algos to smack their lips with anticipation, since such breakouts, even when slight, are among the most bullish events that can occur on charts. Of course, it could also be a great way for Mr. Market to set a ruinous trap for bulls, since they are already giddy over the steep run-up in stocks that has occurred since late December. That's why we are unfurling the yellow flag with tonight's updates. The chart shows how a 921-point drop to the green line would trigger a theoretical short sale. As a practical matter, we don't have to wait for something that significant to happen in order to take a bearish position. We like the short at these heights, ahead of the actual signal, because Wednesday's breakout smells like such a rat. Fed Murmurings By treating Thursday's moderate selloff as the potential start of something big, we risk little. Even if the broad averages were to move somewhat higher, drawn magnetically toward October's record peaks, that would only heighten our skittishness about bulls' heedless climb up a wall of worry that looks primed to collapse. It's surprising that stocks were able to make any headway at all in the wake of the Fed's latest murmurings. Dovish they were not, but index futures still upticked for modest gains after the close on Wednesday. They peaked in volumeless trading overnight, however, and DaBoyz began Thursday unable to corral enough bears to keep the faux rally alive. If stocks open higher on Friday, or if they continue upward during the day, it'll be tempting to fade buyers by acquiring some cheap put options. [This just in: Existing homes sales

So much for the wall of worry! Bulls have improbably shrugged off steep downturns in the housing and auto sectors, rising interest rates, a costly tariff war with China, the pernicious rise of socialism on Capitol Hill, the economic implosion of China and Germany, a likely peak in corporate profits, a strong dollar that has sapped the earnings of U.S. multinationals; and, most recently, evidence that retail sales nosedived during the Christmas shopping season. All of these things together do not diminish the unstoppable look of the Industrial Average (see inset) as it moves within striking distance of new record highs. The Dow sits just inches from a 25,998 target we've used to stay with-the-flow, even as the trend has seemingly flouted sanity itself. At the target, the Indoos will have exceeded an important 'external' peak at 25,980, but will also lie within easy distance of an even more important peak at 26,277 from three weeks earlier. Speaking as a hard-core permabear who has learned to tune out gut feelings so that the charts can speak for themselves, your editor will mention a 28,110 Hidden Pivot that would become a logical minimum objective once the Dow has conquered the obstacles noted above. That would put it nearly 9% above current levels and 30% above the 21,712 nadir recorded in the final days of 2018. ______ UPDATE (Feb 20, 10:25 p.m.): The rally topped at 25,986, just 12 points shy of the target flagged above. Above it, the next important benchmark would be 26,084, equal to a small but technically significant peak made on November 9. Let's see whether buyers have the moxie to take it on. _______ UPDATE (Feb 28, 9:45 p.m.): The Indoos are primed to fall a further 154 points to the 25761 target shown in this chart. 

The Indoos stalled Monday almost precisely at the 25,440 midpoint Hidden Pivot shown. Buyers subsequently gave up almost no ground, setting up a likely move past the resistance on Wednesday. If it's decisively exceeded, that would all but clinch more upside to the 25,998 target.  This was already no worse than an even-odds bet because the initial thrust, labeled A-B in the chart, exceeded two prior peaks without taking a breather. That created a powerful impulse leg; however, an even more powerful one would occur if the target is hit, since it lies slightly above a key 'external' peak at 25,980 recorded just before the stock market began to fall apart in early December. Technical analysis aside, you can use your eyeballs to answer this question: If the Dow reaches the 25,998 target, will it be close enough to new all-time highs to make them likely? Whatever your answer, the very possibility will be foremost on traders' fevered brains, conceivably 'magnetizing' October's all-time high at 26,951. ______ UPDATE (Feb 13, 4:56 p.m.):  Today's action, which featured a pop to 25626, followed the script above. Please note that a pullback today to the green line at 25161 would trip a mechanical buy, stop 24,883. _______ UPDATE (Feb 14, 5:20): No change.

The Dow Industrials tripped a 'mechanical' buy signal with last week's dip to the green line (see inset). The bullish Hidden Pivot pattern is not perfect for proprietary reasons that I won't go into here, but suffice it to say, if this were the five-minute chart of some garden-variety stock, there would have been little reason to fear loading up the truck when the Indoos bottomed last Thursday. Yes, it's difficult to be so blandly objective about the chart shown, because it is not some rinky-dink stock we are looking at; rather, it is a momentous chart whose ups and downs could foreshadow the health of the global economy over the next five years. What's Wrong with This Picture? There are caveats, to be sure. Using the same fearless rules that govern the charts of stocks we don't much care about, key resistance lies at the red line, 25559. But once decisively above it, at around 26,000, the blue chip average would become an even-odds bet to test the all-time high. There are a half-dozen powerful reasons why this 'shouldn't' happen, including the nascent collapse of two key U.S. economic sectors: housing and autos. There's also a growing likelihood that China's economic downturn and a slowdown in Germany are about to spread to the rest of the world. A tariff deal with China would almost certainly reverse the bearish tide in stocks, at least for a while. But if there is no deal, it's hard to imagine Wall Street summoning the energy for a last hurrah, let alone a sustained move into the ionosphere.

I hesitated yesterday to hazard a guess about the next big move, but it now appears the Indoos are torquing up for a possible 549-point romp. However, this would be predicated entirely on an easy and decisive push past the 25,629 midpoint Hidden Pivot resistance shown (see inset). This is a big 'if' at the moment, since the DJIA will surely tank if Democrats take the House. The over/under bet is prohibitively expensive if DIA straddles are used, so we'll repair to the sidelines and await the election returns like everyone else. For investors, tonight's vigil puts one in mind of the science fiction film that ends with uncertainty over whether a meteor will collide with Earth or miss it by an inch. For investors, a big night for the Democrats would be almost as bad as the meteor hitting smack dab in the middle of the American heartland.______ UPDATE (Nov 7, 9:15 a.m.): Here comes that 549-point rally!  My friend Larry Amernick, a technical forecaster, explained the stock market's blase reaction to the election as follows: The investigations and impeachments the Dems have threatened will go nowhere, and ratcheting up their nastiness won't phase Trump. Legislatively, they will destroy their chances in 2020 and ensure Trump's reelection if they are perceived as too obstructionist. They are no longer the opposition party and will thereforeneed to Do Something legislatively. They now completely OWN Obamacare, and the Republicans can sit back and relax. Pelosi, Waters et al. can't do any real damage with the GOP firmly in control of the Senate. Etcetera.

We were using a 25,956 rally target on Friday after the Indoos pushed past a lesser Hidden Pivot resistance at 25529. However, the failure of the rally top to exceed the external one at 25,608 recorded on October 19 put the uptrend temporarily in jeopardy, triggering a 'CI' short at 25,207 on the subsequent selloff. It projects to a minimum 24,835, a midpoint support tied to a 'D' downside  target at 24,092. A tradeable bounce from very near p=24,835 seems very likely, so be ready to bottom-fish there with a very tight stop-loss. The equivalent support in DIA, which is optionable, lies at exactly 248.14._______ UPDATE (Nov 5, 5:39 p.m.): What can one say on a day when the Dow has risen nearly 200 points while the erstwhile darlings of the digital world got savaged? Knee-jerk rotation was the completely dominant theme, but there is little point in trying to predict its course until after the election results are in.

I was initially surprised at how easily sellers penetrated the 24177 Hidden Pivot support we'd been using as a minimum downside projection. However, a look at the chart reminded me that the point 'A' high of the target pattern was not exactly first quality. Fortunately, the new point 'A' shown in today's chart (click on inset) is the only one remaining, and we can therefore assume its corresponding 'D' target at 23,765 will be hit. The leg down to it would be strongly impulsive, implying that any subsequent rally, however spectacular, could conceivably set up an opportune short. If you want to bottom-fish the expected reversal from 23765, the equivalent target in DIA lies at exactly 237.69. _______ UPDATE (Oct 30, 8:54 p.m.): Keep the bottom-fishing trade in mind, but note as well that a push above 25308 would make the odds of filling our bid a longshot.______ UPDATE (Oct 31, 5:58 p.m.): This gas-bag exploded on the opening, stranding our niggardly bid. You can try to get long again using this developing 'counterintuitive' set-up. The trade is recommended only to those who have recently viewed a Wednesday tutorial session -- including today's, which caught a $400+ 'CI' winner in AAPL._______ UPDATE (Nov 1, 10:03 p.m.): The DIA trade set-up worked, but not in a way that would have been easy to leverage. For now, use 25,529 as a minimum upside target. That's the midpoint resistance of a pattern on the 60-minute chart that projects to as high as 25,956 (a=24,481 on 10/30, b=25,336).

I've presented this chart before, with a bull-market target at 27,251.  If the Dow had gotten within 5-10 points of this Hidden Pivot and begun to fall, I'd have treated the weakness as the almost certain beginning of a major bear market. What happened instead was that buyers sputtered out 300 points shy of the target. Initially, this led me to expect one last charge higher. But with the sharp decline we've seen in October, odds have grown that a bear market has indeed commenced.  Even so, you can see that a further fall to perhaps 20,000 would not alter the very bullish look of the big picture. Imagine a descending price bar reaching into the low 20,000s or high teens, and it would be easy to infer that such a move was not just corrective, but overdue. From a Hidden Pivot perspective it would not become bearishly impulsive on the monthly chart until such time as the tiny but still significant 'external' low at 20,379 is exceeded to the downside. Many market observers, especially permabears, would be saying at that point that the end of the world was nigh. But I am writing these words as much for you as for me, a reminder for later that if and when the Dow has fallen by 4,000-6,000 points, this could mark the completion of a correction within a bull market destined for much greater heights.

Expect the "other shoe" to drop this week, culminating in a tradeable bounce from within inches of the 24,997 midpoint Hidden Pivot shown. Even if not, we are bound to get a revealing picture soon of a bull market now in its tenth year and presumably tiring. If the weakness we saw last week was the start of a C-D leg of a bearish ABCD correction from October 3's all-time high (26,951), we might expect it to continue at least to the 24,997 "hidden" support noted above.  If the support gets crushed, we can assume that a further fall of 820 points to 24,177 is under way. Alternatively, there's a chance buyers could temporarily turn things around next week and push the Dow above C=25,817. But don't expect the effort to produce a new all-time high. More likely is that any such rally would set up a C-D plunge from a higher level. In the meantime, I will keep this tout publicly viewable so that you can follow whatever changes in the technical picture may be warranted._______ UPDATE (Oct 22, 5:47 p.m.): No change in my bearish outlook, but here's a chart you can use that shows two price points that would flash, respectively, a "yellow alert," and a "red alert" just ahead of a short-covering panic._______ UPDATE (Oct 23, 10:23 p.m.): The powerful bounce that ended the day did not negate the bearishness of the decisive breach of the 24,997 pivot mentioned above. In fact, a rally to x=25,407 would trigger a 'mechanical' short, stop 25,817. Click here for the chart -- and stay close to the chat room for real-time guidance, since there are good ways to get short in companionable vehicles with risk under very tight control._______ UPDATE (Oct 24, 7:30 p.m.): The Dow still looks bound