Dow Industrial Average

A friend who runs a heavily trafficked gold site asked me where I thought the stock market would be trading in six months. I replied as follows:  I don’t usually go out that far in time, but if I had to speculate I’d say the Dow will be groping for traction at 9057 – a “midpoint” Hidden Pivot -- come September, provided the recent highs are not exceeded. (And if they are exceeded, I don’t think it will be by much.)  All bearish bets would be off, though, if DaScumballs somehow contrive to pop the Indoos throught the May ’08 peaks around 13136.

The bottom of yesterday's selloff came within 30 points of an 11525 Hidden Pivot that can continue to serve as our minimum downside objective.  However, any slippage beneath that support would portend more weakness to at least 11355.  For anyone looking to catch a trampoline bounce, that number looks like it would be an excellent place to moor a speculative bid with a tight stop-loss.  The provenance of both targets is shown in the accompanying chart. _______ UPDATE (9:52 a.m. EDT):  The Dow began the day with a not atypical short-squeeze, disdaining to curtsy toward our lowball bid.  The thrust was impulsive, implying that whatever pullback that occurs here is just that.

The Dow has a clear rally target at 12572, although the lengthy sideways movement since mid-February suggests bulls are not in great shape to take their epic hoax to a new level. Hoax or not, we can continue to look for a breakout, and to play it with relatively little risk, by focusing on impulse legs that develop on charts of 15-minute-degree or less. Alternatively, if the Indoos drop dead, reconciling themselves with natural law, look for the first air pocket to hit 11876.  _______ UPDATE (3:20 p.m. EST):  With the Indoos off as much as 240 points so far today, it's become pretty obvious which  of the two targets is going to get hit.

Yesterday's selloff needed to back up for another running start before it could achieve impulsiveness on the lowly 15-minute chart. What this implies is that the biggest single-day decline of 2011 may have been more bark than bite. We shall see, but sellers will need at the very least to extend the decline past the two "external" lows (numbers 4 and 5) highlighted in the chart if we are to take them seriously.  The worst that can happen if the usual maniacs take this market still higher is that we'll have another opportunity or two to short at great prices.

Like numerous other vehicles that we track, the Dow Industrials are closing on a Hidden Pivot resistance that's capable of engendering an important top. It lies at 12439 and is shown in the chart.  This number corresponds to the 12412 target already given for the Mini-Dow -- a target that can be shorted via camouflage or with a tight stop-loss.

A Hidden Pivot target not far above, at 12484, is as clear and compelling as the 1356.00 target we're using for the E-Mini S&P.  And just as the crystal clarity of the target inclines us to treat it with skepticism each step of the way, we'll plan on shorting it aggressively if it should be reached.  Keep in mind that the Hidden Pivot midpoint -- in this case 11684 -- is always going to be in play either until the target is reached, or point 'C' (10930) is exceeded to the downside. An implication of this is that a 350-point plunge to the pivot would not necessarily be bearish.

With a 1356.00 E-Mini S&P target in sight for the Mother of All Bear Rallies, I looked to see whether an analogous target could be identified for the Indoos.  Assuming they continue to rise about 7.03 points for each E-Mini point, that would indicate 12279.  However, when you work the visually obvious ABC price points on a chart of the same degree, you come up with a 12444 target.  You can double-check my math and assumptions, but all of the calculations appear to be correct. That means we'll simply have to live with the discrepancy and to look for the Dow to open up a lead relative to the S&Ps as both vehicles move higher.

The accompanying chart shows why the picture will turn ugly for permabears if the Indoos should touch 11868 -- a tad less than 300 points from here --  within the next day or two. That would refresh the bullish impulse on the monthly chart, presumably lending buoyancy -- and authority! -- to the 21-month uptrend for weeks or even months to come.

The Indoos could seriously damage bearish hopes and dreams if they continue to push higher on the monthly chart. Notice how a print exceeding 11867 would create a bullish impulse leg of monthly-chart degree.  That's a mere 308 points, or 2.7%, above current levels.  The blue chip average could get there this year, even at the current pace, but it could do so in just two days if there were just one more robust short-squeeze left before New Year's.