E-Mini S&P

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

Yesterday's nasty head-fake squandered a minor, bullish impulse leg on the hourly chart, but a bigger one is very much intact and presumably waiting to be exploited by DaBoyz.  The proximal cause of the selloff was a downbeat pronouncement on the economy by Bernanke, who evidently can no longer hope that "bad" news will be received on Wall Street as "good" news for stocks. Perhaps if the Fed considers taking administered rates below zero, traders will get back in the spirit of things, always hoping for yet more easing whenever it looks like the economy is doing another kamikaze. Concerning the E-Mini futures, I've displayed them on the 240-minute chart so that you can see how little damage was done when They pulled the rug out late in the session. In theory it will take a rally of at least 9.50 points to get a C-D follow-through leg under way.  From that point, the move would have an additional 28 points of upside potential -- equivalent to a Dow rally of close to 300 points. Most immediately, with the futures in a tightly engineered holding pattern shortly after midnight, night owls and camoflageurs should monitor the 5-minute chart for the subtly impulsive blip that could signal a resumption of the bull trend. ______ UPDATE (10:40 a.m. EDT):  We'd grown so accustomed to short-squeeze rallies launched off shallow corrections that this morning's long-squeeze collapse off a shallow distribution came as both a surprise and a delight. It always feels right as rain when stocks are moving synchronously with the economy, and so the selloff has come as a bracing acknowledgment of a darkening reality. Pivoteers may have noticed that the so-far low came within less than a single point of the 1258.75 target predicted on the hourly chart by these Hidden

We spent much of this session belaboring the soon-to-be-mistaken notion that the broad averages were headed higher. In fact, stocks were bound for collapse the next day, notwithstanding the fact that the E-Mini S&Ps had generated a very powerful bullish impulse leg a day earlier. The lesson here is that it’s okay to trust your gut feelings, but always to verify them by monitoring impulse legs on the lesser charts. In this case, a signal to get short was triggered on the 5-minute chart just five points off the high of a very nasty selloff. Not all went awry for us, incidentally. The reiteration of a bearish call on crude, for one, in the face of a sharp rally was borne out by a plunge in prices the next day.

By day's end the futures had cruised past no fewer than three external peaks on the hourly chart, implying that bears are in for a rough patch. There are no particularly promising Hidden Pivots to reference at the moment as rally targets, but we should be attentive nonetheless to any opportunity that arises to short this hoax yet again with relatively little risk (much as we did from 1371.00, and again from 1358.25, two key highs since a presumptive bear market began in early May).  If we work a "reverse" ABCD pattern along the lines shown, the minimum upside objective is 1334.50. This technique is used by some chartists and traders and works some of the time, but not nearly as consistently or reliably as the conventional method that we usually use.

With most U.S. traders sawing zzzzz's, DaBoyz are running up the index futures on thin volume.  Shortly after 4 a.m. EDT, the E-Mini S&P has wafted the equivalent of about 60 Dow points, meeting no discernible resistance for more than two hours.

A short squeeze on extremely thin volume is accomplishing during the night session what buyers could not accomplish during the day -- i.e., pushing the futures above Friday's 1277.25 high to generate a fresh, bullish impulse leg on the hourly chart. Any camouflaged trading opportunities initiating entry with-the-trend will likely come from the impulsive pattern that I've fleshed out hypothetically on the hourly chart (see inset).  If the actual move as of 3:35 a.m. EDT goes more than a few ticks higher than the current 1279.50, however, opportunities to board the easy way are apt to diminish. A time-stopped entry may be necessary, with a buy-stop at 'x' taking a quick exit after, say, 30 seconds if no liftoff is forthcoming. _____ UPDATE (10:59 a.m. EDT):  The rally matched my sketch almost exactly, although, strictly speaking, the absence of a single-bar 'C' on the intraday charts would have precluded taking the 'buy' signal at point 'x'.

Price action at week's end was moderately bullish for the near term, since the pullback that followed an impulsive upthrust was not sufficient to create an offsetting, bearish leg on the hourly chart. Even so, the follow-through so far has been feeble, and the futures will need to push above 1271.00, a Hidden Pivot midpoint shown in the chart, to seize the advantage.  Night owls may need to zoom down to the three- or five-minute chart to catch a ride, but there could also be a second opportunity if the futures pull back after slightly breaching the 1279.75 'look-to-the-left' peak shown. _______ UPDATE (1:59 a.m.):  DaBoyz have manipulated the futures eight points lower in an attempt to exhaust sellers ahead of Monday's opening. At the moment, there are no downside pivots as compelling as the conventional structural support at 1252.25 created by last week's low, but if it breaks down and the selling turns nasty, look for more weakness down to at least 1242.50. Day traders can bottom-fish that Hidden Pivot support with a stop-loss as tight as three ticks.

Yesterday's constipated price action brought the futures slightly closer to a key low at 1237.50 recorded on March 17. A test of support there still seems likely, but please note that an upthrust today exceeding 1288.50 would probably leave bulls in charge when the new week begins Sunday evening. Night owls looking for a lift can try to camouflage their way aboard via a pullback from a tick or two above 1275.75.  This set-up is shown hypothetically in the inset. _______ UPDATE (11:16 a.m. EDT): An impulse leg whose strength is poorly concealed has left us with two tradable options: 1) use the  camouflage of the very lesser charts to enter on a smaller pattern; 2) wait for 'everyone' to get stopped out on a dip below 'c', then enter on the second signal. The entry trigger at 1272.00 has not yet been tripped, but it's very close.

Hidden Pivots are less important to our immediate outlook than the March 17 low at 1237.50.  It begs to be tested, although we should monitor the lesser charts for signs of the corrective rally that could come at any time. It would take a print at 1268.25 to touch one off today, although the external peak associated with that number looks too obvious to give the canny buyer good camouflage. The peak can be found on the 5-minute chart on June 15, at 12:10 p.m. EDT.