Dow Industrials

The E-Mini S&Ps are four points in-the-green early THURSDAY morning, but there's 15 points more upside before they run into a Hidden Pivot with the power to resist the tide. If the resistance fails, however, it would be signaling a possible 400-point rally in the Dow next week.

Although our bullish outlook for stocks remains unchanged, the 900-point Dow rally we projected in late May hasn’t been the quite romp we were expecting. In fact, springtime’s tiresome ups and downs appear to be continuing into summer, and it now seems possible this behavior could persist well into August.  If so, the risk of financial loss will be lower in the coming weeks than the risk of being bored half to death. Yesterday’s price action underscored the stock market’s reluctance to do much of anything, even when conditions seem right.  Such as Sunday night.  For a rare change, it looked like the slimeballs who control stocks in the off-hours were on the ropes. Usually, they take shares down as far as possible Sunday evening in order to exhaust sellers just ahead of Monday’s opening. This allows Them to short-squeeze stocks ahead of the bell, catalyzed by virtually any crumb of news that could be construed as even remotely positive. This time, however, with index futures getting pounded overnight, the familiar stage-managed rebound was nowhere in sight.  Stocks in fact continued their fall for the first few hours of Monday’s session, with the Dow down by almost 200 points at the lows.  Then, just when it looked as though DaBoyz might get trampled, shares suddenly reversed and headed north, recouping half the day’s losses by the final bell. So how might the markets continue to bore us in the weeks ahead? For starters, we expect yesterday’s weakness to resume, bringing the September E-Mini S&P down to at least 1280.50 today or tomorrow.  With the futures trading for around 1301.00 as of this moment, the implied 20-point drop would spell a relapse of about 160 points for the Dow Industrials.  We’d be cautious buyers at that level, using the Hidden Pivot

It warmed the cockles to see the Dow Industrials and Gold moving in opposite directions yesterday, even if the latter swooned a nasty $15 intraday before scaling the wall a second time to close near the highs.  The world somehow makes more sense to us when gold prices are rising and shares are falling.  Isn’t that what’s supposed to happen when the central banks are hell-bent on trashing their respective currencies, and every economy outside of China’s continues to grind toward cliff’s edge?  The news wasn’t all bad, either. For one, scientists have apparently made some progress in figuring out why Lyme’s disease recurs in some people. Much closer to Wall Street obsidian heart was a report from Alcoa that profits had more than doubled in the second quarter.  Unfortunately, you’d have to be an old-timer to remember when good earnings from the likes of Alcoa was enough to push the U.S. stock market higher.  Anyway, probably a dozen Alcoas would not have made up for the deepening gravity of Europe’s financial plight. Whereas it supposedly was only Greece that was in need of critical care, now Italy has joined the short list of financial basket cases close enough to disaster to take the whole system down. And yes, we are being deliberately ambiguous when we avoid mentioning which “system” might come crashing down.  Europe’s financial house of cards?  The global banking system? The world economy? Frankly, we can’t even guess how far the damage might spread if “confidence” in Greece, Italy…Spain! were suddenly to evaporate.  We’ve put quote around the word “confidence” because only an imbecile could fail to see that whatever confidence exists is egregiously misplaced.  Even so, misplaced confidence is better for the time being than no confidence, since it’s all that’s keeping the global financial system

Wall Street’s Christmas-in-July revelry proved short-lived when it was reported on Friday that the U.S. economy had created just 18,000 non-farm jobs in June. Recall that a day earlier, speculators goosed the Dow Industrials more than 200 points above the previous day’s lows on word of a faint blip in retail sales and a drop in jobless claims. Not much to celebrate, really, but it was all the mainstream media (MSM) needed to cheerlead the officially sanctioned story of a strengthening U.S. economy.  Alas, as the week drew to a close, traders sank back into apparent despair, evidently persuaded by the news of the moment that Thursday’s statistical oasis had been but a mirage. For their part, the news media showed no discernible embarrassment over their ongoing, schizophrenic coverage of the economy’s supposed ups and downs.  When will they cop to the fact that regardless of whether stocks are rising or falling, the economy is down-and-out and likely to remain so for as long as the government acts out the fable of a Keynesian recovery? We wonder whether the financial press is even capable of understanding that it’s not the news that causes stocks to rise and fall, but cyclical forces that lie beyond our understanding. Moreover, it is the movement up or down of stocks that colors our perception of news rather than the other way around. Thus, on days when the broad averages have rallied on “bad” news, the network anchors will assert that “investors,” prescient and wise as ever, have looked beyond the negatives to glimpse sunshine on the horizon. Similarly, when stocks fall on “good” news – say, a downtick in unemployment -- the mainstream media (MSM) will play down the statistic and magnify another that seems more simplistically compatible with falling stocks. Obama's Fate Overall,

Gin up a garden-variety short squeeze in the index futures Sunday night, add a dollop of surprisingly less-than-horrific news from Europe, and before you know it the Dow Industrials are in an upthrust that could carry another 900 points, topping 13,000.  That’s not the way things were supposed to play out.  The story had it that the Fed would do everything in its power to force stocks sharply lower so that investors would flee into the dubious safety of Treasury paper. That in turn would strengthen the dollar, paving the way for yet more promiscuous monetization after this afternoon’s expiration of the abortive QE2 program.  Perhaps the Masters of the Universe are still planning to implement this scheme, but with stocks falling from a higher, giddier plateau?  We should know within a few weeks. Meanwhile, in theory the central bank will have some time to play with, since the Fed’s budget allows for the purchase of Treasurys with the interest on Treasury paper already held in its portfolio. (Ah, yes: How can it be called “monetization” if the Fed is actually “paying” for the Bills, Bonds and Notes it buys?) We’ll leave it to bloggers and the not-quite-ready-for-prime-time media to examine the Fed’s method of paying for whatever it must buy at the next auction.  They’re likely to find elements of Ponzi, Rube Goldberg, and Bernie Madoff, but they’ll first need to get past the stench of it to peel away some layers. In the meantime, with sovereign banks, U.S. households, hedge funds and other would-be buyers becoming increasingly skeptical toward Treasury debt, it seems plausible the central bank will deplete its interest “income” more rapidly than policymakers might hope. What to Look For Concerning the stock market, lest our bullish forecast worry or frighten any right-thinking permabears, we would

You don’t need to be a chartist to see that the stocks will need to test the key low made in mid-March before anything serious happens. For the Dow Industrials, that would imply a fall of 378 points from these levels to 11556, or about three percent. What then?  Although a bounce seems likely,  we wouldn’t expect it to last for more than a few days, if that long.  Moreover, because the support is so obvious, we should expect the Indoos to dive toward it in the days ahead rather than approach it gingerly.  After all, why would traders buy the blue chip average as it is falling if they “know” it’s going to fall at least to the support?  We might expect such buying and for a bullish turn to come from somewhere above 11556 if the market had a reason to rally. In fact, The Great Recession seems to be edging toward another flirtation with Depression – one predicated on further, intractable weakness in the real estate sector, along with whatever psychological fatigue is about to hit as a result of QE2’s epic failure to stimulate much of anything. With respect to the stock market, we would ordinarily employ the Hidden Pivot Method to forecast price action for this summer. (You can learn to do this yourself, and to do it impressively well, by clicking here).  In this case, however, our target of 11506 only gets us halfway to the next logical low.  Once again, you needn’t be a swami to see that the Industrial Average will fall to 11000 if the mid-March low gives way.  The only question is, how quickly will it happen?  Our hunch is, very quickly, especially given the prospect of a budget battle on Capitol Hill. Although until recently we had viewed the

Stocks performed a fright-mask swoon yesterday as traders collectively demonstrated yet again that one morning’s perfect knowledge does not necessarily a perfect afternoon make.  It was tricky going for all of us, although in retrospect the selloff merely mirrored the flaky, gratuitous rally that occurred earlier in the week. Our own near-term expectations for stocks had been bullish Wednesday night, but that’s not to say we were surprised by yesterday’s quasi-criminal shakedown.  Many widows and pensioners will have crashed on the tarmac, blowing out their portfolios at the lows -- which  in the case of the Dow Industrials amounted to a nearly 240-point deficit. A pity so many seniors probably took it in the shorts, since the Indoos recouped fully three-quarters of their losses by day’s end. Those who hung on for dear life are bound to feel better after yesterday’s adroitly engineered hoax has played out in full with a rally that could take the September E-Mini S&Ps back up to 1298.50 – equivalent to a Dow rally of about 320 points from Thursday’s bottom.  Incidentally, you could learn to calculate these targets (and trade entry-points) yourself – and it’s not nearly as hard as you might imagine.  Click here for details about the upcoming Hidden Pivot webinar on June 29-30. Speaking of calculations, we can save Goldman some time where predictions for the price of Brent Crude are concerned.  The dastardly firm’s “energy team” evidently was in a tizzy yesterday over the day’s Big Surprise, the release of 60 million barrels of oil from the strategic reserves of a bunch of countries. Whoever authorized this global distibution of swag, presumably to launch the U.S. dollar into the doomed trajectory of a bottle rocket, must have thought that crude oil was in danger of not falling by itself.  They

In Monday's touts for the Dow Industrials and E-Mini S&Ps, I've provided some precise reference points so that we can know whether mere weakness might be turning into a cascade.  Charts are included with both, so check them out if you want to be prepared for the worst.

Considering the relentless rumble of earth-shaking news lately, it's hard to believe the Dow Industrials have given up only a measly 800 points since topping in late February. I've noted here before, somewhat facetiously, that it would probably take nothing less than a mushroom cloud over the Saudi oil fields, or a smoldering tanker in the Strait of Hormuz, to truly spook investors.  More and more, it seems this is actually the case. Clearly, this is how the stock market is programmed to react when the irresistible force of a massive global-liquidity blowout is pitted against grim economic realities that augur a possible Second Great Depression.  The bulls (i.e., algorithmic trading-machines fueled by OPM and Fed funny-money) are feathering back at the moment, but shorts had better dive for cover if and when the Japanese restore auxiliary power to their cooling capacity. (And neither should it be overlooked that Japan has recently augmented financial-system liquidity by a reported trillion-and-a-half yen.)  A respite from meltdown worries seems bound to produce a short-squeeze capable of recouping most of the lost ground in just a few days. If so, it would likely be a short-lived spree that will itself succumb to such nagging problems , two name just two, as $5 gasoline and a destabilized Middle East in which the U.S. has almost no role to play.