Dow

This session provided us with a front row seat to yet another dramatic day on Wall Street. The broad averages had been swinging wildly for two weeks, and on this particular day the Dow was down about 400 points after rallying 600 points the day before. Surprisingly, though, there were no bullish impulse legs to be found on the hourly chart, giving us reason to consider why stocks were likely to head lower. We spent the remainder of the session looking at December Gold, which resumed its furious rally as we watched in real time. This held little surprise or suspense for us, though, since we “knew” exactly where the rally was headed: to 1810.70, a middling Hidden Pivot resistance.

Comic relief came yesterday in the novel form of a Colorado shootout that put the until-recently-unheard-of Dougherty Gang behind bars and left gun-moll and self-styled redneck stripper Lee-Gracey Dougherty with an exit wound in her leg.  Only in America, as they say.  As we went to press early Thursday morning following an all-day outage of Rick's Picks (and a thousand other web sites served by a Dallas data center that was hit by a power blackout), the Bonnie-and-Clyde wannabees were still the top story on Google news, proving that timing is everything if you want to be an overnight sensation. Wall Street in particular must have welcomed the entertaining story of the Dougherty siblings' interstate armed robbery spree, since, without it, the evening news would surely have been dominated by video clips of trading-floor denizens puking their guts out following a 520-point plunge in the Dow.  However, as of late Wednesday night, it would appear that the traders had lost little time trying to wrest back control of the headlines with their own brand of comic relief:  a 200-point rally in Dow index futures that was continuing into the wee hours on Thursday. We wouldn't be so churlish as to admonish them for their newly reinvigorated faith in America, but shouldn't someone break the bad news to them about the dire condition of Spain and Italy? Meanwhile, the previous, huge dead-cat bounce, a 429-pointer on Wednesday, elicited in the Boulder, Colorado Daily Camera what may have been the most clueless headline concerning the economy that we've seen all year:  Fed Pledge Boosts Stocks.  So, did yesterday's 520-point reversal perhaps occur because somebody discovered the Fed had crossed its short, slimy little fingers when it made that promise? The sub-headline was just as bad: Market Soars After Reserve Vows to Maintain Low Rates

Twenty-nine months into the Mother of All Bear Rallies, it was unlikely that mere mortals would predict the precise start of the stock market's collapse, inevitable and long overdue though it may have seemed.  However, no one should be surprised by the selloff’s ferocity, nor by the prospect that the first wave down may have run its course in mere days. Traders who have been waiting for the Big One for years undoubtedly are re-discovering how hard it can be to reap a windfall even when you are right about the trend. We think shares still have a long, long way to fall, although we harbor no illusions that the Mother of All Bear Markets will be easy pickings. That much should have been obvious yesterday, for not even bears with brass cahones could have withstood a spectacular short-squeeze rally that saw the Dow trampoline from lows around mid-morning to a final-bell peak 600 points higher. Five hundred of those points came in the final hour alone. The proximal cause of this wilding spree was a Fed announcement that short-term rates would be held near zero through mid-2013.  Although no one, not even Paul Krugman, could believe at this point that more easy credit will have a positive effect on the economy, traders bought the news anyway. As we have explained here many times before, they did so not because the news was bullish, but because they expected others traders to react as though it were. Bears would have found it no easier to catch a ride south a week ago, when the onslaught of selling began.  Three days earlier, on Friday, a strong rally trapped bulls and wrung out bears. But the hook was set Sunday night when news of a debt-limit deal sent index futures into a second

An interesting day, for sure. But a surprise?  It shouldn’t have been, since even the Guvvamint’s statisticians and spinmeisters seem to have noticed that The Great Recession is back with a vengeance. Under the circumstances, anyone so stupid as to be loaded to the gills with stocks deserved the full brunt of yesterday's devastation.  The stock market’s collapse surely didn’t take us by surprise. The night before, under the headline “This Rally Is….Doomed!” we’d disseminated the following alert to subscribers: “The strong bounce off yesterday’s apparently oversold low is a fraud, and it is doomed, so we’ll have a very strong incentive to short every… rally target we can find…”  We’d also made the following declaration in commentary published here yesterday:  “Lest any of our own readers be shrouded by the fog of the Mainstream Media’s coverage of the financial markets and global economy, we’ll state for the record that the technical evidence is overwhelming that the Mother of All Bear Rallies begun in March of 2009 is over.” If we sound pleased that the market appears, finally, to be having a massive heart attack, it’s because stocks for too long have been the captive of quasi-criminal forces that could charitably be described as pond scum.  The good news is that when the Dow is trading 10,000 points lower in a few years, no longer doing the bidding of high-frequency traders, mountebanks, thimble-riggers, Murphy men and arse bandits, that will set the stage for a true bull market that will run for a generation. At that point, with “money” no longer available interest-free and in practically unlimited quantities for rampant speculation, stocks will rise once again on their individual merits, savings will have a purpose, and capital will seek out its most productive uses. We hope we’re around when all

If the E-Mini S&Ps achieve their newest rally target, it would imply a Dow rally of more than 300 points.  Our short-term bias will therefore be bullish unless the broad averages signal otherwise on charts of hourly degree.  As always, if the broad averages reach our bullish targets, we'll short them with very tight stops.

If anyone needed convincing that the stock market has become invincible, yesterday was the day.  Japan was shaken badly by another big earthquake, crude oil quotes were bounding above $110, Portugal was threatening to topple Europe's financial house of cards, and the U.S. government was hours from shutting down. How did Wall Street take the news?  Like a pro, actually. The stage-managed panic was over almost before it began. Stocks dove on word from Japan -- but not in a way that showed even the slightest sign of fear.  Rather, the market swooned in the fashion to which we've grown accustomed, violently shaking down widows, pensioners and a few other nervous nellies, but few "players."  A precipitous, 100-point loss in the Dow was recouped in minutes, and when the dust had settled it were as though the day's headlines were no more alarming than the kind of routine stuff that fills the "Daily Roundup" box on an inside page.  Now, I'm no Irving Fisher, and I don't mean to suggest that stocks have reached a permanently high plateau.  Far more likely is that they will give back in a week everything gained since 2009.  In the meantime, however, it is clear that it will take far more to bring this market down than the latest evidence that the world is indeed going to hell in a handbasket.

With index futures up slightly and bullion down slightly early Thursday night, there was little action on which to speculate. DaBoyz appeared to have shorts on the ropes in the Mini-Indexes, but the spike was so fleeting that perhaps bears are all-squeezed-out for the time being.  If not, I've provided a somewhat alarming target in the E-Mini S&P that is commensurate with a Dow rally of about 200 points.

Yesterday's call here for a 500-point Dow rally may prove to have been one felicitous step ahead of the news.  With the U.S. economy headed into deepest recession, if not outright collapse, nothing makes me queasier than putting out such a bullish forecast. And yet, once again, mechanically following the discipline of the Hidden Pivot System has kept me honest and alert. Under the circumstances, there was no ignoring the fact that a bull cycle now five weeks old easily penetrated a key midpoint resistance on the E-Mini S&P's hourly chart.  Whether this portends stupid new highs for the broad averages and yet more hubris on Wall Street remains to be seen.  Whatever happens, though, we'll be ready.

With major, long-term targets not far above in several key vehicles that we monitor closely, we double-checked the Hidden Pivots not only for accuracy but for coincidence, since they could conceivably produce a very important top for the stock market within a week or less. Indeed, the S&Ps, Dow and bellwether Apple are all bound for ‘D’ rally targets that could all be hit around the same time. Meanwhile, although we looked for a real-time trade in the E-Mini S&P, the lesson here was that it is sometimes best to do nothing.