Dow Industrial Average

The AB segment on the accompanying chart looks too elongated to generate a like C-D leg, but we'll use it nonetheless, since price action at the 10261 Hidden Pivot midpoint can tell us if we're on the right track.  A pullback from that number, precisely, would indicate 10489 if it is subsequently breached.

The downtrend projects to 9431, implying another 440 points of creative destruction over the near term. The feverish short-squeeze at the tail end of yesterday's session racked up 80 points, hinting that DaBoyz might be more eager to sell 'em near the top of a phony rally than to buy 'em at whatever ostensible bargain-basement lows might obtain intraday.  Still, with the July 4 holiday coming up and no clear call on whether America is taking Monday or Friday off (or perhaps both) bullish seasonality will be ratcheted up to the max. We should therefore be on our guard against the gratuitous leap higher, since it is hardly a longshot bet.  It would be telegraphed in subtle fashion with a print exceeding  9967.57 on the 5-minute chart.

The Dow didn't fall far enough to create an impulse leg on the hourly chart, but the weakness was nonetheless sufficient to create a so-far bloodless duel between bulls and bears. If the Dow does a 180 today for the usual non-reason and heads higher, you should use 10645 as a target, since that's where DaBoyz will be taking it once they recover their mojo.  For clues that this may be about to happen, watch for a midpoint bounce on the 15-minute chart similar to what I've sketched out.

I mentioned a 10572 rally target for the Dow in today's commentary; the chart show its provenance.  The midpoint resistance lies at 10445, just a few points above yesterday's high, so we might expect quite a bunny-hop if it is taken out.  Will it be?  The suspense is killing me.

Bears who are primed to panic on the next 100-point rally should take a look at the Dow's weekly chart before they jump: heavy, heavy, heavy!   It's difficult to predict how high, or even whether, DaBoyz will be able to squeeze the blue chip average this week, but we'll be watching vigilantly each day for opportunities to get short. Assuming yesterday's low at 10186 is not taken out first, a midpoint resistance at 10286 shows promise.  If it gives way, however, buyers would be telegraphing more upside to as high as 10387.

I've provided benchmarks in today's E-Mini S&P tout by which we could judge the staying power of any short-squeeze that may be lurking.  For the Indoos, the squeeze would need to surpass 10488 to have entertainment value for us, and the rally would need to be unpaused on the hourly chart once above 10315.

A Hidden Pivot target at  10324 is equivalent to the one at 1118.50 that I've flagged today for the E-Mini S&P.  If you'd like to try your luck shorting up there, the target can be interpolated and used in any way that suits you, although the Mini-Dow or perhaps the Diamonds would be the most direct play.  You should calculate the Mini-Dow (YM) target yourself, though, since my publishing it here might compromise its usefulness. _______ UPDATE:  The Indoos retreated after topping at 10315 -- not quite close enough to the target to get us short.

How far can this short squeeze go, right?  Many of those who bought into it may feel chastened when the markets spring to ostensible life Wednesday morning, so don't expect the hysteria to work wonders for a second straight day.  Fortunately, we can use an objective benchmark to tell us if things are getting out of hand:  last Thursday's 10272 peak.  Any progress above it today would need to be taken seriously, even by those of us who have to stifle a laugh every time stocks leap the Wall of Worry in a single badly misconceived bound.

Only 471 more points to go before the Indoos reach the bearish, 9595 target (or perhaps 9534 if any lower) advertised here earlier. What then?  It's difficult to imagine that the blue chip average will not take a tradable bounce, but if the Hidden Pivot is hit in the throes of a sky-is-falling crisis, it could conceivably spell more downside to at least 8559, the midpoint support of the pattern shown in the chart. In any event, it will only require a print below 9678 this week or next to create the first bearish impulse leg on the weekly chart since March 2009.