E-Mini S&P

In volume-free night trading, DaBoyz have sleazed the futures back up to within a couple of points of Monday's high, demonstrating their (probably sound) belief that they still have bulls by the balls.  Where to next? Scrunch the hourly chart (see inset) a bit and, paradoxically,  this will force you to squint a good ABCD rally pattern into sharper obviousness.  This one projects to 1333.25, giving camouflageurs a theoretical 18 points to make hay. Camo cover will be hard to come by, but my suggestion would be to look for a small but perfect ABC pattern amidst the panic and confusion that is certain to attend a breakout above the 1318.25 peak.

We’re not keen on market alerts, dear readers, because you probably have far too many of them to sift through already, each with a different and sometimes deliberately outrageous point of view. Even so, we should like to caution you that recent, coincident tops in Comex Gold and the S&P 500 are best not ignored. Although we remain bullish on both of these vehicles, you can infer that the yellow flag is out. This means that bullion and the broad indexes will be receiving more scrutiny than usual in the days and weeks ahead, so that Rick’s Picks subscribers will be better prepared to dodge the avalanche that is increasingly a possibility. Our specific predictions, disseminated to subscribers in the form of daily “Trading Touts,” had called for a shortable top at 1316.75 in the E-Mini S&P, and at 1681.50 in Comex March Gold. In the actual event, the recent high in Gold occurred at 1681.80, three ticks from our target; and in the E-Mini at 1318.25, six ticks from our target. These targets were derived from our proprietary Hidden Pivot Method, and although they are intended for traders, they can also be quite useful for purposes of forecasting. In this case, if the E-Mini S&P were to rip through the recent high within the next day or two, it would imply that bulls have the power to drive stocks significantly higher. Any sign of this would shift our attention toward a 13085 Hidden Pivot target identified earlier for the Dow Industrials. That’s 409 points above current levels – a good week on Wall Street, although it could take a bit longer, or even abort, if Europe’s financial problems return to prominence in the news. Why "Abort"? Why "abort"? For starters, euroheadlines such as yesterday’s – that Greece and its

A 1316.75 rally target we'd  been using since, practically, the Mesozoic era got hit yesterday as the futures worked their way up to a slightly higher top at 1318.25. The subsequent selloff was shortable though not easily, even using camouflage. If you tried it, the first place you could have initiated a trade that met all of our requirements was at 1308.25 at around 12:03 p.m. (3-minute chart, a=1313.25, b=1308.00 and c=1309.75.) The joyride would have been short-lived but profitable. Now, night owls can look forward to moderate downside predicated on a 1301.00 Hidden Pivot target (see inset) that a recent webinar grad mentioned in the chat room. That's not enough to shoot for, and, come to think of it, you might even get better odds trying to get long on the '3' with a micro stop-loss. (Just don't expect it to take you very far.)

There's an interesting divergence between Gold and index futures Sunday night, although the differential is not yet sufficient for us to infer that business-as-usual won't have them re-synched by sunrise. The E-Mini S&P opened on a smallish gap down, but there has been little movement since.

Late Sunday night, the (very) minor trend was bearish, although it would take but a few ticks of upside to change that by creating 'dueling' impulse legs on the lesser charts.  An appropriate response is to ignore this vehicle for the time being, saving our attention and energy for better opportunities.

Although there are somewhat higher targets yet to be achieved, yesterday's top came within 1.00 point of the target shown and therefore offers a possible opportunity for shorting.  We haven't done much of this since the Mother of All Bear Rallies began in March 2009,  but it's probably time to practice getting short in case 2012 fails to live up to the ebullient expectations Wall Street's shills.   When you've had a look at the chart, check out the one-minute bars if you're a night owl looking for action.  As of around 9:45 p.m., good opportunities were non-existent, but your patience could yet yield a winner.

We confirmed a bullish outlook for stocks with a close look at charts for the Industrial Average and the E-Mini S&P. We also looked at ways to force trades when the pickings are slim. Usually, this entails zooming down to a small enough time frame to find ABC patterns suitable for our purposes. Finally, we considered some specific reasons why the odds are heavily stacked against retail customers who would attempt to trade puts and calls. From a risk:reward standpoint, unless you’re capable of nailing swing highs and lows consistently, you’ll get a better bet at a $2 parimutuel window.

The fleeting lunge to a so-far high tonight at 1307.50 smacks of desperation and underhandedness, although a toothsome rally target at 1316.75 remains valid nonetheless. Digestion pains should lower this trading vehicle overnight, but it would still be a buy on any upwardly impulsive ABC pattern you can find on the lesser (i.e., 15-minute or lower) charts. Camouflageurs will need to be especially careful, however, since the rally could follow the creation of a bearish impulse leg similar to the one shown in the chart.

Although the stock market is unlikely to grind to a complete halt, it seems to be experiencing what could be called nervous paralysis. Yesterday, for instance, achieving a modest rally target at 1316.75 that we’ve been using for the E-Mini S&P should have been a piece of cake. In fact, buyers were unable to push the futures above 1302.50 before retreating into the close.  This tedious undulation has repeated itself perhaps a dozen times since Christmas, and although stocks have trended timidly higher over that period, the total gain has amounted to no more than about 220 points for the Dow Industrials. Because there is evidently not much conviction among bulls, let alone a good reason to be bullish; and because bears have yet to recover from the trauma of the Dow’s 260-point short-squeeze on January 3, stocks have drifted nervously higher, unable to correct for reasons explained here yesterday. Those reasons mainly concerned the gusher of funny money that the central banks have channeled into the financial system. This is inflation, pure and simple, and although it provides a plausible rationale for buying stocks, we have our doubts that the stock market will ultimately prove to be the best investment vehicle for discounting inflation. Why?  Simply because inflation could play out as an instantaneously ruinous hyperinflation before subsiding just as quickly into a deflation far more destructive than the one we are now experiencing. Waiting for News In the meantime, it seems clear that the mountebanks who maneuver the markets up and down from one day to the next are waiting for the kind of news that will ease their task. Stories concerning Europe’s slow-motion collapse have been temporarily pushed beneath-the-fold by Europe’s seaborne disaster off Italy, but they are certain to re-emerge with a vengeance, and soon. It