E-Mini S&P

The futures rose very precisely Thursday on Hidden Pivot 'steps', although it took a wicked swoon late in the session to develop sufficient momentum to reach 1992.00, my target for the session. The intraday peak of the day's powerful, 50-point rally was 1990.50 -- close enough for our target to be considered fulfilled. It's anybody's guess whether the arse bandits who work the night shift will be able to squeeze the futures still higher, but if they do, they're likely to meet discernible resistance at 1996.50, a minor Hidden Pivot. The effect will be compounded by psychological resistance at the 2000 barrier. Under the circumstances, the best we can do for now is to wait and see whether short-covering can overcome a major impediment.  DaBoyz are not likely to give up easily.

A Hidden Pivot target that I'd posted in the chat room Tuesday came within a few ticks of catching the low of yesterday's monster rally (see inset). The trade could have been worth as much as $4600 per contract so far. Regardless of whether you caught the move, it has important implications going forward -- especially if you are a bear panting for the chance to short into strength. It's tempting, especially if you believe, as I do, that we are in a full-blown bear market that has a very long way to fall. However, because so many traders sees the rally as highly unlikely to achieve new record highs, it is bound to lure more than a few bears into acting recklessly.  Predictably, the shorter they get, the more the rally will gain in power when they have to cover. Bottom line, we should be prepared for the sort of rally that defies logic and reality and which will exceed all expectations. We'll have a better feel for its power once we've seen how minor corrections play out and the ease with which minor rally targets are exceeded (or perhaps not).  If corrective moves do NOT reach their targets, that will be our first clue that the countertrend will. That is precisely what happened at Tuesday's 8:30 p.m. low: The futures reversed from a  'midpoint pivot' at 1851.75 and never looked back. For real time updates as more craziness unfolds, stay tuned to the chat room, where a hundred Pivoteers will be on hand to provide the play-by-play, just as they've been doing. Click here for a free trial subscription that will give you access not only to the chat room, but to daily actionable 'touts' and bulletins, 'impromptu' analysis sessions online and email alerts.

The pattern shown in the chart, with a horrific worst-case target of 1753.00, is the one we should use for now, since it has been confirmed by a so-far 30-point bounce from within 1.25 points of the 1851.75 midpoint pivot. The target is equivalent to an approximately 1000-point drop in the Dow.  I published it in the chat room (adjusted for a slight error in my choice of point 'a' highs) shortly before the closing bell, but no one seems to have taken advantage of it. Be that as it may, the futures can be 'mechanically' shorted from p=1851.75, and/or p2=1802.25, provided you thoroughly understand the rules of the mechanical trade. Alternatively, the most bullish thing the stock market has going for it is that it will be irresistibly tempting to short it every step of the way higher. A week or two of that attitude, and we could see new record highs.

Get used to seeing the futures spasm wildly, because this is likely to continue for at least a few more weeks. My hunch is that over that time the futures will recoup at least two-thirds of their recent losses, but also test Monday's lows. This implies trading opportunities galore, but only for the very nimble. The point was driven home yesterday, when I needed to zoom down to the two-minute chart to nail minor swing highs and lows. The Hidden Pivot Method works especially well when price action turns violent, but if you're going to try to turn this to your advantage, you'll need to think small, hunkering down on charts of five-minute degree or less. Shortly before 9:00 p.m. EDT, the pattern shown held promise. However, night owls looking for better odds should wait for a pullback from just above the 1912.25 peak shown. That could set up a relatively low-risk buying opportunity even though the night-session rally will have attracted more bullish interest than we should prefer.

In the chat room Friday afternoon I referred to a 1944.00 Hidden Pivot target as a 'done deal'; nothing that has happened since has changed my mind. Index futures have gapped down hard Sunday night, trading as low as 1950.50. That's 20 points beneath Friday's close and equivalent to about 180 Dow points. The opening reflected a dumping of market orders, but my hunch is that more selling will come in Sunday night and that it will be steady enough to force the futures still lower -- presumably to at least 1944.00. I'm not expecting Black Monday, as I noted in the Thought for Today, but we shouldn't be surprised if durable-looking Hidden Pivot supports like the one at 1944.00 give way without much of a fight. That number is a 'spec' buy nonetheless, but you'll be on your own with regard to risk management. A short from p2=1965.00 would also be enticing, but I'll recommend it only to subscribers who fully understand the rules of the 'mechanical' trade. ______ UPDATE (11:51 p.m. EDT): The futures have fallen the equivalent of 500 Dow points so far Sunday night, and the selling is starting to feed on itself. Ordinarily, the scavengers who control the night session would be looking to exhaust sellers so that they can short-squeeze stocks ahead of Monday's opening. Tonight, however, they have evidently gotten sandbagged themselves, sucking up so much inventory trying to find a bottom that they lack the ability to slow the decline.  I've run out of compelling targets, but we may not need one if the tempo of  the selling picks up overnight. Were that to occur, the futures will soon start to feel the gravitational pull of last October's low -- better sit down for this -- 1815 !  If Monday's selloff were

At press time, the futures were in a relatively steep dive that has taken out Thursday's lows while exceeding the 1124.50 Hidden Pivot target that was my worst-case projection for the day. My guess is that the move is news-driven -- but that it needn't have been, since the futures looked primed to fall anyway. I doubt whether I'll know for sure what the news is before this tout goes out to you, since, if you can see it getting discounted in real time, the perps who are doing the discounting are undoubtedly wired to sources far subtler and less obtainable than, say, finance.yahoo.com. My guess, however, is that it is simply a feedback loop caused by selling in Asian markets that was catalyzed by the earlier selling in U.S. markets. Stocks are too volatile for me to suggest a specific trade at the moment, but night owls should use the pattern shown to gauge the strength of the downtrend. The immediate target is 2008.25, nine points below current levels, but if it's easily exceeded, look out below.  Paradoxically, you can be bolder trading Hidden Pivot levels when stocks are moving sharply. As you may have observed on Thursday, HP targets work with even greater accuracy than we've grown accustomed to when stocks are quietly range-trading. _______ UPDATE (7:49 a.m. EDT): My target caught the overnight low within two ticks. The ensuing 20-point bounce could have been worth as much as $1000 per contract  to anyone who got aboard. The rally failed to generate a bullish impulse leg on the hourly chart, but we should monitor this 'illegitimate' pattern nonetheless to gauge the strength of the bounce, which was continuing at this time: a=2012.00 (2 a.m.); b= 2028.75 (5:30); and c= 2017.75.  A buy signal has already been tripped at

Lest bears break out the bubbly prematurely, I've reproduced a chart that shows why the 2134.50 rally target broached here earlier is still in play, at least theoretically. The best reason I can think of for the target NOT to be reached is that we are so very eager to get short there.  Of course, the goal of getting short will be far more difficult to achieve with the futures thrashing around like a snakes' body after its head has been severed. No one said it would be easy, though, and we shouldn't be too surprised if the actual opportunity to nail The Top turns out in retrospect to have been beyond reach.  The desperation evident in yesterday's failed short-squeeze tells us that stocks really are in trouble here. However, we won't try to be heroes, shorting this vehicle with a 20-point stop-loss. Better that we wait for a clean shot than get whipsawed for the next few days.

Mr. Market has been making it extremely painful for bears to stay short. The reason for this is that nearly everyone we know is bearish right now; and, for the first time in more than six years, it would appear that they are finally going to be right. The market is in a major topping process as far as we can tell, but there's no way all of us permabears are going to make a big score when stocks collapse. Mr. Market simply doesn't work that way, although the precise manner in which he will screw bears out of the payoff they've awaited for years is maddeningly unpredictable. My own favorite scenario begins with a devastating short-squeeze rally on a Friday, followed by some geopolitical or financial disaster over the weekend that causes stocks in Asia and Europe to collapse Sunday night. By the time U.S. traders awaken on Monday morning, most of the damage will already have been done. U.S. stocks will open on a breathtaking, unshortable gap lower, leaving the algos and high-frequency traders to beat each other to death. (Even the darkest cloud has a silver lining.) More immediately, and based on a 2096.50 rally target that served us well yesterday for purposes of picking a short-term top, the futures' subsequent push past it implies they are bound for the 2134.50 target shown. It is tradable from  either side of the market, bull or bear, but you should be prepared for a stall -- also possibly tradable -- at p2=2112.50. That pivot can serve as out minimum upside target for the very near term, but it may be of value only to night owls. ______ UPDATE (10:20 p.m.): Nothing to add after Tuesday's tedious scuddle. The target shown remains valid.

The futures were flat shortly after 9:00 Sunday night, but my hunch is that the lull is setting up a resumption of last week's short-squeeze rally. This would be confirmed by a decisive breach of the 2096.50 midpoint pivot shown. If the red line is exceeded by perhaps 4.00 points, a pullback to it could conceivably set up a 'mechanical' buying opportunity for night owls. It would also hint of further upside to as high as 2119.75, the 'D' target of the pattern. That would equate to a Dow rally of more than 200 points and put the E-Minis within easy distance of new all-time highs. I'd be eager to get short up there, especially if the rally hits a Hidden Pivot target that has been six weeks in coming. The precise target is given in the chat room in a post published by me at  21:12. It can be found on the hourly chart, where A=2038.25 on July 9, and B=2126.25 on July 20. _______ UPDATE (8:47 a.m.): The futures have sold off moderately overnight, so far with little technical consequence. The weakness would generate a bearish impulse leg on the chart shown if it were to exceed 2076.00 to the downside. The 2119.75 rally target will remain theoretically valid in any case, however, as long as the pullback doesn't exceed the point C low at 2073.25.