E-Mini S&P

With the Dow down nearly 200 points in the early going Thursday, it looked like bears had the bad guys on the run. Alas, the broad averages turned up with a vengeance and forged steeply higher for the remainder of the session. Not coincidentally, the bounce came from a 'secondary' Hidden Pivot support I'd flagged the night before. The support was a relatively minor one, but that didn't make it any less likely to produce a humdinger of a rally. The menace of the short squeeze became apparent when it began to exceed some prior peaks on the lesser charts. I posted a mild warning in the chat room when this occurred.  Although the squeeze left intact a longstanding downside target at 2090.25, it will have taxed the patience of bears, who must be starting to wonder whether two straight days of favorable breezes is even possible any more. It is, of course, but the wished-for days are unlikely to come when we are wishing for them. The tradable pattern for the moment is the one shown, presumably after the futures have frustrated bulls with a second point 'c' low.

Trading activity slowed to a crawl on Wednesday as Jews around the world observed the Yom Kippur holiday. With stocks in a holding pattern, a bearish technical picture remained unchanged. We've been using the 2090.25 downside target of  pattern larger than the one shown, but for trading purposes it will probably be more useful to focus on the little stuff, since the lesser intraday charts provide the best tool we have for fashioning entry points with risk under tight control. That implies p=2124.75 should be used as a minimum downside objective for now. If it's smashed, however, D=2108.75 would be in play, and thence 2090.25. Alternatively, the very short-term picture would turn bullish if DaBoyz can generate enough short-covering to take out the 2140.75 point 'C'. ________ UPDATE (Oct 13, 1:51 p.m. ET): Bears continue to be their own worst enemy, as well as the only source of buying power strong to heft this brick past resistance. This morning's bullish, trampoline reversal came from 1.00 point below the 2108.75 Hidden Pivot support noted above. The more important downside target at 2090.25 is still valid in theory and will remain so unless this short squeeze hits 2141.00. However, we shouldn't discount bears' well-proven ability not merely to shoot themselves in the foot, but to do so repeatedly with a semiautomatic weapon.

How exhilarating! Just when bears were ready to throw in the towel after nearly three weeks of asphyxiating tedium, stocks swan-dived Tuesday into what we can only hope is an unfathomable abyss.  The S&PS were down almost 35 points at their lows, and although a short-covering rally in the final 90 minutes recouped nearly a third of the days losses, there was reason to think buyers might do the right thing and drop-the-hell-dead before the Yom Kippur holiday ends at sunset on Wednesday.  The old adage to "buy Rosh Hashanah, sell Yom Kippur" seems to be getting a nice play this year in any case, and we can only hope that it continues to hold true with a vengeance. For how else will the stock market and the economy ever return to sanity?  The current mania is nothing that a 10,000-point plunge in the Dow wouldn't cure, of course. But if that's what we are seeing the beginning of, it's going to take some time, and not just a little pain, before investors come to understand that $100 million homes, and $60 billion valuations for such as Uber, are not only not normal, but downright nutty. From a technical standpoint, the E-Mini S&Ps looked primed to fall a further 42 points, equivalent to a drop in the Dow Industrials of about 350 points. That would bring the futures down to the 2090.25 target shown.  It was first broached here several weeks ago, and although the gratuitous ups and downs since then may have caused chartists to lose sight of the targeted support, its attainment was never seriously in doubt. Interestingly -- or perhaps not, since even quants often rely on obvious technical patterns -- it was a lowly trendline, shown in the chart as a descending brown line, that contained

The futures' conflicted, tightly impacted spasms of late have meaning only if we focus on well-formed ABC patterns like the one shown (using the coordinates labeled in green). It predicted today's 1263.50 top to the exact tick, so we'll infer that the next move, if higher, would reach the 2171.50 target shown. That's not saying much, since a rally to that price wouldn't even surpass the September 22 high at 2172.75 that has served as the very modest number for bulls to beat for three very tedious weeks. It's all we've got to trade for now, though, with an alternative micro-target at 2174.00 if it's exceeded. Both of these Hidden Pivots are going to be useful mainly to scalpers, but we'll wait for 2197.75 before we get serious again about shorting this hoax-of-a-bull-market. Pivoteers can locate that target on the hourly chart using the following coordinates: A=2107.75 (9/14); B=2172.75 (9/22); and C=2132.75. I won't drum-roll this one, though, since it has enough things going for it that it could prove especially useful.

The gratuitous oscillations of the last two weeks will have depleted the patience of most investors by now and worn out traders searching for trends with a life span of more than an hour or two. The moderately bullish target at 2168.50 given here on Friday remains valid in theory, but I would give more weight to the bearish pattern shown. It projects to 2131.50, a midpoint Hidden Pivot support. If and when the red line marking that support is breached decisively -- meaning by more than a couple of points -- it would put the next hidden support, a 'secondary' pivot at 2110.88, in play. In the meantime, p can be used for bottom-fishing, or as a staging area to get short 'mechanically' after it has been exceeded for at least a few bars.

Much as I distrust the stock market's buoyancy this week, I have to go with 'technicals' that suggest at least a small rally is coming on Friday. The pattern shown yielded a quintessentially 'counterintuitive' buy signal at the green line, then a belated opportunity to get long 'mechanically' on the pullback to the green line today.  If I were analyzing this chart in a vacuum, with no biases or an inkling of what was going on in the real world, I'd rate the 2168.50 target a lock-up. Even so, as I've implied in the current The Morning Line, you should not let a strong close induce you to take a long position over the weekend. This advice comes straight from the gut, but I will feel no embarrassment if stocks come charging out of the gate on Monday._______UPDATE (Oct 7, 7:18 a.m. ET): The futures stopped out buyers of a promising pattern once overnight and are setting up to do it again with a move below 2148.00. This suggests weakness will finish out the week, although it would be extremely unusual for any selling to pick up steam during the day.  In any event, bears shouldn't get their hopes too high.

The bearish abc pattern shown is the one we should be looking at now, since it's got it all, Hidden Pivot-wise. The p2 secondary pivot at 2110.88 would ordinarily serve as a minimum downside objective for the near term, but my strong gut feeling is that the futures will dive straightaway to d=2090.25 if they crack the midpoint support at 2131.50.  I've used lower-case coordinates for the downtrend simply because there is a larger, bullish ABC pattern in effect. It would take quite a plunge to invalidate it -- the equivalent of about 1400 Dow points -- but this is October, after all, the market is in loonie-bin territory, and I lack the imagination to speculate on what could conceivably keep the broad averages buoyant. The world is falling apart, so why shouldn't the stock market start reflecting this?______ UPDATE (Oct 5, 9:26 p.m. ET): No change in my outlook or analysis.

Much as we might wish for Friday's rally to have been a one-day fluke, the buying generated a robust impulse leg on the hourly chart that bears will have to reckon with when the new week begins. Any short-covering is likely to be subdued, however, since many traders and Wall Street denizens will be observing Rosh Hashanah, the Jewish New Year, from Sunday evening until Tuesday evening. (Subscribers please note: Rick's Picks will not be published on Tuesday for this reason.) In any event, you should use the ABC pattern shown to gauge the strength of any buying. It seems unlikely that DaBoyz will try for new record highs on Monday or Tuesday, but we shouldn't be surprised if they position the broad averages for a short squeeze that accomplishes this on Wednesday.

I wouldn't write off The Bull That Wouldn't Die quite yet, since its institutional sponsors are still hard-wired to unlimited free money. But with the key reversal yesterday of our number one bellwether, AMZN, it seems likely that the broad averages will have to go at least somewhat lower in order to get a running start at new record highs. It is beyond my imagination to envision a news environment in which this could occur. However, we must still allow for it, since a bear market in stocks would set in motion a series of events that are unthinkable -- that could only lead to a Second Great Depression.  The Powers That Be have held the inevitable implosion at bay for nearly a decade, but this has required increasing amounts of stimulus that have by now lost their punch. It is a measure of the folly and delusion rampant in the financial world that Japan evidently thinks it can power its way out of the deflationary black hole with yet more stimulus. Even the benighted spinmeisters in the news media no longer seem to believe this is possible. From a technical standpoint, the futures look bound for the 2090.25 target shown.  There are at least a dozen ways to trade this, from both sides of the market. Stay tuned to the chat room if you care, since the E-Mini's have been garnering considerable attention lately. As always, if so clear and important a Hidden Pivot support as 2090.25 fails easily, that would be signaling more than a mere squall ahead.