E-Mini S&P

Hours before the opening bell, on thin overnight volume, DaBoyz short-squeezed this pungent wad of sucker-bait up to the 1940 resistance everyone's been talking about. It's tempting to think that the modest breach of the resistance -- the intraday high was 1943.75 --  will turn into a trap that will snare bulls and bears alike.  With Monday's move above 1940, the futures have opened a more or less unimpeded path to last autumn's highs near 2100.  The prospect is enough to get bulls' juices flowing, but also to put the fear of the lord in bears who for good reason started shorting this flying pig below 1900.  Are near-universal expectations of a runaway short-squeeze sufficient to make it not happen? It's something to consider, since the squeeze scenario seems almost too pat. But I'm not going to let gut feelings get in the way of technical signs that suggest otherwise. See today's AMZN tout for the cold logic behind my assumption that the rally is likely to continue.

The rally sputtered out at week's end just shy of a key resistance at 1940.00. The pullback from a 1933.50 peak has been mild so far, and that is bullish as far as it goes. On the other hand, the resistance remains intact, and we should not presume that it will be exceeded merely because it is there, taunting bulls, as it were. To gauge buyers' resolve after index futures resume trading Sunday night, I'd suggest using the minor, bullish pattern shown, since it meets all of our criteria. An easy and decisive push past p=1924.50 would shorten the odds that the 1950.50 target will be reached. It would also imply that 'mechanical' bids can be used to get long to the target from p, p2, or both.

Denizens of the Rick's Picks chat room are angrier, more despairing and more confused than I've seen them in a while. Although I hesitate to go against the well-grounded pessimism of so savvy a group, gauging the intensity of subscribers' mood swings can sometimes be useful for sorting out the stock market's increasingly vexatious ups and downs. Currently, the broad averages are in their fourth day of a vicious short squeeze, with no clear top in sight. All hell could break loose, technically speaking, if the S&P futures were to pop above 1940.00 (see inset), a key peak within the large, bearish pattern shown. That pattern was pointing much lower last week, when, for reasons unknown, sellers turned tail and dove for cover. The pattern, as well as the bears who shaped it, will be chop suey if 1940 gives way, as seemed likely at Wednesday's close. On the other hand, a spike into the blue could conceivably exhaust bears, fulfilling the one condition that is absolutely necessary for a hellacious downturn. I had assumed that a push above 1940 would all but ensure a test of record highs near 2100. Maybe not, though. If a spike that falls well short of that mark -- say, to around 2025-2040 -- were to occur on a Friday, that could set up a Sunday night surprise, catching bulls and bears alike with their pants down. Stocks in Europe and Asia would need to be falling hard to begin with, but those markets are just as full of hot air as ours and ready to topple. All of this is speculative, of course, but I offer it as food for thought -- and as a reason for bears not to give up just an inch shy of possible vindication and redemption._______UPDATE (February 19,

The large downtrend shown tripped a ‘mechanical’ short on last week’s rally back up to the green line, but I’m going to pass this one up rather than try to be a hero. The first rule of the ‘mechanical’ trade is to initiate them only when you are confident that a ‘D’ target– here 1669.25 — will be reached. In this case, however, although the bearish pattern is well confirmed by the precise bounce from the red line, bears have yet to escape the vicious squeeze begun from last Thursday’s low. Although shorts can still be initiated via ‘camouflage’ using the pattern, since the green-line signal noted above has in fact been triggered, the hourly chart doesn’t look too promising for bears at the moment. Actually, if this short-covering rally continues above the 1940.00 point ‘C’ high of the pattern, after having gone no lower than p=1804.63, it would be warning bears to dive for cover, since, by my runes, a possible test of late December’s highs near 2075 would become no worse than an even-odds bet at that point.________UPDATE (7:02 p.m.): Tuesday's short-covering spree, which peaked at 1992.75, did not change the outlook and analysis given above. The futures would need to dive below 1833.50 today to even hint of possible trouble in Wall Street's delusional Shangri-La.

It's hard not to like the pattern shown, since it has so far provided the basis for a painless 'mechanical' short from the green line that would have reaped a two-day profit of $3400 per contract. Notice as well that reversing the position and going long on Thursday from the midpoint Hidden Pivot would have racked up additional gains of about $1800.  So what is it saying now?  Quite clearly, that the futures will be on their way to exactly 1733.19, the 'secondary pivot' of the pattern, if and when they crack 1800.88. There are two 'mechanical' shorting opportunities implied by this analysis, so stay tuned to the chat room if you're interested.

The composite weekly chart (see inset) allows us the interpretation that January's low surpassed not only the August 2015 bottom, but the key low recorded in October 2014.  Thus was the sharp selloff last month powerfully impulsive. Moreover, it portends another leg down, presumably within the next 2-4 weeks, to as low as 1669.25.  From a visual standpoint, it is hard to imagine a second leg down as steep as January's. But even allowing for a couple of sideways bars for the next week or two, the futures are unlikely to avoid a test of the midpoint Hidden Pivot support at 1804.63. My gut feeling is that this number will be decisively exceeded the first time the downtrend encounters it, implying further slippage to at least 1736.94, the pattern's 'secondary' pivot.  Regardless, the fact that last month's plunge took out two prior lows of weekly-chart degree all but guarantees that any rally from these levels will fail.  The big moves will be to the downside in the months and possibly years ahead, and we should therefore take greater risks to get short. We did so during Wednesday's weekly tutorial session with a 'forced' short that failed by a tick to catch the high of the 26-point plunge that ensued. We'll keep trying, so stay tuned to the chat room for guidance in real time.

The futures spent nearly six hours yesterday spasming their way to the modest 1860.75 rally target shown. As it happened, the move was tradable using the pattern I'd disseminated Monday night, although the wacky swings generated a point C low that put the trade in the 'counterintuitive' category rather than in the 'camouflage' category I'd originally intended. The futures ended the day on a bullish note, with an impulsive point B high at 1863.75. Because price action was so flaky, however, I'll suggest sorting out entry opportunities in real time rather than according to my best crystal-ball guess. Up or down is a coin-toss at the moment, although I expect the Big Moves to be down and the rallies to be sucker bait for the foreseeable future.

Even with a strong downhill start at the opening, bears failed to hit their mark yesterday -- a Hidden Pivot target at 1817.50 that I'd posted in the chat room Monday shortly before the opening bell, when the futures were trading about 35 points higher.  The actual low occurred at 1821.75 -- a 51-point plunge from Friday's close. Some subscribers reported getting short for at least a part of the ride, however, on a rally to an 1884.75 correction target that came within a single tick of nailing the overnight high.  At Monday's close, the futures were in a mild short-squeeze that had yet to exceed the second prior peak we require to signal a proper impulse leg. But if buyers push this brick the few extra inches needed to get past the 1855.50 peak labeled in the chart, bears had better give them wide berth, since it would signal the likely imminent resurgence of buyers.  Traders take note: A 'bc'-type pullback from anywhere between 1855.75 and 1856.75 could provide a no-brainer entry opportunity for night owls looking to get long with minimal risk. I've sketched this hypothetically for your explicit guidance.______ UPDATE (10:57 a.m. EST): The futures have flounced around for the last 14 hours, negating the trade I'd suggested. They remain too squirrelly to care about at the moment.

Friday's bounce precisely from a secondary Hidden Pivot at 1866.00 has validated the pattern shown, along with its 1847.25 target.  A 'mechanical' short from p=1884.75, stop 1897.25, is theoretically in range, but I'll suggest substituting a 'camouflage' entry instead, since Sunday nights will always be a little too unpredictable to put a trade on autopilot.  A decisive push past 1884.75 would not kill the appeal of getting short, but doing so from X (the green line) would require just as much caution as I am suggesting this evening. Note: At the moment, the 5-minute chart is 'go' for a bull trade to d=1883.50, where a=1867.25.  Night owls can get long for a short (i.e., 5-point) ride to the target via a mechanical bid at p=1878.63.  If you catch a profitable ride north, use it to cushion a wide stop-loss on any attempt to get short. ________ UPDATE (9:23 a.m. EST): Hidden Pivots proved precisely relevant to Sunday night's price action, the futures having rallied to an overnight high at 1884.50 before tanking 41 points to a so-far low of 1843.75.  If you used camouflage to get short as suggested, referencing the 5-minute chart, the first successful entry would have occurred at 1882.75 (2:35 a.m.). Since we're in a bear market, a second leg down today is hardly inconceivable. If so, use this still-developing pattern on the hourly chart to trade: A=1884.50 (3:00 a.m. EST); B= 1845.25 (5:00 a.m.); and C=1856.91, for p=1837.13 (minimum downside projection; p2=1827.31; or if any lower, D=1817.50).