E-Mini S&P

Short-squeeze mania was at its most powerful yesterday, pumped to-the-max ahead of the three-day holiday weekend.  The hysteria pushed the futures somewhat above a 1098.75 midpoint pivot that we were using as a minimum correction target.  The actual high so far has been 1104.00 -- an overshoot sufficient to imply that buyers are likely to dominate once again today.  Even so, the very difficulty of getting short on a Friday preceding Memorial Day compels us to try. I'd suggest using camouflage patterns on the three-minute chart to do so, although the one-size-fits-all solution would be to buy a put-option "lottery ticket" at the closing bell if the broad averages are at or near their intraday highs. This should not be done in size, since it is a pure speculation, presumably unsupported Hidden Pivot factors.

We should tone down the hooting and guffawing for the moment, since  the futures did manage to poke their ornery little snout above Friday's and Monday's highs before heading south yesterday.  This left a bullish impulse leg on the hourly chart, and even though the pullback was continuing into the night, DaBoyz will have strong seasonality (i.e., Memorial Day weekend) in their favor if they should wish to turn things around on Thursday.  The good news for bears  is that buyers were unable to capitalize on a truncated but still powerful impulse leg that occurred with two hours left to go in yesterday's session.

Despite yesterday's hyperdrive recovery off a 1036.75 low, I'll stick with the 1022.75 target given here earlier.  It may be a while in coming, since shorts will have been spooked pretty badly by the hysterical buying in the final hour, but I do believe it will come nonetheless.  In the meantime, there are two external peaks on the daily chart by which we might gauge the persistence of any mania that develops. The first lies at 1088.75 and is easily within reach, but the second, at 1147.50, will be much more challenging.  The 1022.75 target will remain valid in any case, so long as 1174.75 (aka point 'C') is not exceeded to the upside.

DaBoyz have allowed the futures to fall 16 points tonight in an attempt to scare up a bottom they can buy confidently.  Another four points will get them to an obvious spot -- perhaps too obvious -- Friday's 1051.25 low. Nor is it a healthy sign that the June contract has dipped beneath the May 6 panic low twice in the last two sessions without producing much of a bounce. Bottom line: the 1022.75 minimum downside target still looks like a lead-pipe cinch.  Bulls would gain respite on a print today exceeding 1093.75, however, since that would create a quite robust impulse leg on the hourly chart.

If the bearish target at 1022.75 is reached as predicted, a 500-point plunge lies just ahead for the Dow Industrials. Friday's feeble rally did little to change the outlook, since it surpassed only a single prior peak on the hourly chart, not the two that we require. Even so, we should be on our guard against a short-squeeze, since it would only require a print today at 1094.00 -- 5.25 points above Friday's peak -- to turn the odds against bears for the short-term.  The 1022.75 target would nonetheless remain valid in theory as long as 1174.75 (aka point 'C') has not been breached to the upside, but for all practical purposes it would take only a print at 1123.00 to all but guarantee significantly higher prices thereafter.

Index futures were in the throes of a tedious rally late Thursday night, with the E-Mini S&Ps up as much as 9 points so far.  This is routine short-squeeeze action, but the pullbacks have been shallow enough that it could continue till dawn absent any disturbing news.

We should expect 1022.75 not only to be reached over the next 3-5 days, but to give way to a tradable bounce as precise as the one we saw from 1098.75. More immediately, it will take a thrust above 1096.75 to set bears a-running. Shortly before 3 a.m. EDT, night action remained featureless as the futures ascended into a volume-less vacuum.

Traders easily could have made hay with the 1098.75 support I'd flagged, since the futures popped yesterday for a 20-point rally precisely from that number.  It is the midpoint support of a major downtrend that is itself part of the even larger uptrend begun in March of 2009.  Yesterday's failure to penetrate the support is bullish going forward, but this still needs to be confirmed by the creation of a bullish impulse leg on the hourly chart. As of now, that would require a print at 1150.60 (see  inset).  If the confirmation does not come and the futures close below 1098.75 for two consecutive days, look for the selling to snowball all the way down to 1022.75.

Yesterday's tout nicely anticipated the futility of the  buying spree that began the day. It also left unchanged our warm and fuzzy feelings for 1098.75, a Hidden Pivot midpoint that has served as a minimum downside objective in recent  days regardless of whether the spirit of the moment was bullish or bearish.  Bottom-fishing at that support should be attempted only with camouflage, meaning entering at the 'X' of an abc uptrend on the lesser charts.  If the futures breach the support by more than 2-3 points however, you can infer that the sellers have more business to accomplish. ______ UPDATE (12:29 p.m. EDT):  The forecast hit a dead-center bullseye, since the futures have bounced twelve points so far today off a low at 1098.75.  Camouflage turned out not to have been needed to get long in this instance, but the tactic if used could not have failed to produce a stress-free winner.  Bullseye aside, keep in mind that we used the target all along as a minimum downside objective, and it therefore served the larger purpose of keeping us correctly oriented these last few days, even during at the superficially strong rally noted above.