E-Mini S&P

The May 12 peak at 1160.75 that I've highlighted in the chart remains crucial to determining the ostensible health of the bear rally begun in July. The futures already missed an opportunity to impress us with an uncorrrected thrust through that resistance when they pulled back 27 points last week. That allowed them a running start at 1160.75 that has needed to be corrected as well.  While we should love to see this limping lump of brick dust fail to clear the peak altogether, and for the Kudlows and institutional miscreants of the financial world to be trapped like the Egyptians at the Red Sea, that is probably too much to hope for.  Shorts remain to be squeezed, and even to be stampeded, if the news should turn less than horrific for a week or two, and so we should expect DaBoyz to eventually effect a distribution above 1160.75. Regardless, we'll take things one day at a time, which means we are focused on an 1159.75 Hidden Pivot rally target right now, subject to midpoint cross winds at 1143.50.  Said midpoint has already been exceeded by 2.50 points, so don't hold your breath waiting for a trend failure here.

A textbook-lovely target at 1179.50 seems far too ambitious at the moment, although I'd need to rethink my skepticism if the futures were to close above it sibling midpoint at 1148.50 today or tomorrow. The pattern is shown in the accompanying chart, and if it were, say, Comex Gold rather than an equity index, I'd have no problem with 1179.50. Bottom line, we'll go 100% with the indicators this time rather than the gut.

Yesterday's whoopee-cushion decline overshot an 1124.75 target, suggesting there's more weakness to come.  A new Hidden Pivot at 1110.00 can now serve as a minimum downside objective (see chart), but I don't recommend bottom-fishing there because it coincides with a moderately important low recorded on September 15.  I doubt the support will hold for long in any case, and when it fails we should expect the futures to grope their way down to more substantial structural support near 1082.  ______ UPDATE (1:19 p.m. EDT): The futures have mistakenly headed higher today -- and with a vengeance, although, suspiciously, not with sufficient vengeance to surmount the week's peak recorded on Tuesday. _______ UPDATE (1:51 p.m. EDT):  The vengeance has ratcheted up a click, surpassing Tuesday high, so shorts will end the week with a gun at their heads.  Immediate targets are 1144.25 (exceeded by one tick so far); and thence 1148.50; and finally, short-term, 1152.25.  As always, the penetration of any of those resistance points by more than a few ticks will imply the next is likely to be reached.

Hidden Pivot targets at 1151.25 and 1168.00 that were given here earlier remain valid, but price action has become too messy to say when these numbers will be hit. From a bear's perspective, about the most we could hope for is that the futures don't slither to within striking distance of the 1160.50 peak recorded back in May, since that would give this already ten-week-old bear rally a new lease on life. More immediately, an 1124.75 downside target from the hourly chart that I spotlighted during yesterday's tutorial session remains valid, at least in theory, and you could bottom-fish there with a 1.00-point stop-loss provided the support is not touched more than an hour or so into the session. The pivot was looking great if the futures reached it straightaway yesterday, but the price action since then has grown so convoluted and impacted as to diminish the target's appeal.

Rather than act surprised that DaBoyz could not spook the futures up to our 1151.25 target, we'll simply infer that would-be buyers are having serious misgivings.  There weren't quite enough doubts to turn the hourly chart bearish by the bell, however, but a little downside follow-through to just 1129.50 would do so today. Be warned, though, that if rationality were to slip beyond the bounds of my chartist-enfeebled imagination, not only would 1151.25 be in play, but so would an even more fantastical target at 1168.00 whose provenance is shown in the accompanying chart.

There's a bit more immediate upside -- to the 1151.25 target shown in the chart -- and you can short that Hidden Pivot with a stop-loss as tight as 1152.25. Notice that there's another target too -- of a larger order or magnitude, at 1156.00.  I prefer the lower one, however, since the point 'B' of the pattern yielding the higher target did not exceed June 21's 1124.50 peak.  It is therefore not a true impulse leg, but rather a rally of "sausage-factory" quality.

Friday's clumsily engineered pump-and-dump got past two of the prior peaks I'd flagged, but not the critical third, a look-to-the-lefter at 1135.75. This means that even if the futures should get second wind and push above 1135.75 within the next couple days, the rally will still have failed the strength test, since the kind of buying with the moxie to run till November would have had no trouble getting past 1135.75 on the first try.  The failure was by just 2.25 points, but when we are talking about impulse legs, the miss might as well have been by a mile.  Please note that the peak was initially given as 1133.50 but that adjustment will have no effect on my analysis.

If you view virtually every rally as driven by short-covering, the market becomes transparent and comprehensible.  Right now, for instance.  Mere bullish buying could never have pushed the futures above the summer highs noted here earlier simply because there is no bullish buying going on, save by Kudlow.  But because every day ends with a flurry of short covering, it was only a matter of time before DaBoyz generated enough of it to carry into the night session.  That's where things stand at the moment, shortly before midnight: The futures are trading at 1127.00, a tick off the night-time high, having surpassed two of three important summer peaks on zero volume and unobserved by all but a relative handful of traders. The final peak I'd mentioned at 1133.50 remains to be conquered, but bears shouldn't get their hopes too high that it will survive.  At some point in the near future, this rally will be cited by Obamuck and the pundits as evidence that the economy is recovering. In fact, the rally is little more than a manifestation of the epic fraud that has postponed the financial system's day of reckoning.

Three days of unmitigated, chicken-hearted slack attest to the grave difficulty DaBoyz are having popping the futures above the summer-solstice and early-August highs near 1120.  However, instead of praying for good news, of which there will likely be none, they will simply continue to jerk shorts up and down until they've had enough. When the bears capitulate, it will squeeze the futures above external peak #1 at 1122.00, and probably #2 at 1124.50. We'll require a bit more than that, though -- i.e., a breach of the look-to-the-left peak  at 1133.50 -- before we join the revelers up to cliff's edge.