E-Mini S&P

More Chinese water torture. It’s easy enough to see where the futures are headed most immediately — in this case lower, to the 2094.75 target. But the trend itself is not tradable because of the wrenching spasms that continue to punctuate moves in either direction. Does this irritable and vexatious change in the stock market’s behavior perhaps portend “something big”? A subscriber raised the possibility Friday in the chat room, and I tend to agree. Yes, I’m already on record with a prediction of a 120-point rally — equivalent to about 1000 Dow points.  But it was based on the broad averages decisively exceeding important target recently achieved — something they have yet to do — as well as a push by Apple shares, a global bellwether, to a $140 target that has grown more distant with the stock’s fall last week to $126. We’ve learned never to count out this rampaging bull, which is about to enter its seventh year. But that doesn’t mean the good times can last forever — especially with negatives piling up as the weeks and months roll by. Sentiment and breadth are not merely menacing, but appalling, existing-home sales have collapsed, and profits of big U.S. multinationals have gotten clobbered by the strong dollar. America’s economic recovery, such as it is, has narrowed to a boom in auto sales sustained by a gusher of subprime lending. Count the Escalades in run-down neighborhoods, and be grateful for it while it lasts.

More water-torture. The futures lurched and spasmed their way south on Thursday, presumably bound for the 2098.25 target shown. It can be bottom-fished cautiously, either via camouflage or a 2098.25 bid, stop 2097.75 (!).  Since the mid-line support at 2105.25 has already been breached, night owls could try shorting from there using camouflage. If you prefer a simpler, mechanical entry, you'll need a 2108.00 stop-loss, but keep it to one contract unless you are well on top of the trade.

The 2126.25 Hidden Pivot resistance shown can serve as a short-term rally target, although an intervening dip exceeding the pattern's point 'C' low at 2099.75 would carry a whiff of menace. As of yesterday, the futures looked game for another leg up. That's because they achieved a target at 2117.25 of somewhat greater degree. Someone mentioned this target in the chat room before it was hit, and although it would have served perfectly as a place to have gotten short two ticks ahead of the 10-point downdraft that ensued, I couldn't recall the target's provenance at the time. (For the record, on the 60-minute chart it was: A=2085.50 on 2/11, and B=2095.00 on 2/13.)  For now, you can short 2126.25 with a stop-loss as tight as 1.00 point, but use only a single contract unless you've been on board for at least part of the implied rally. Late Wednesday night, the most promising opportunity to do so would come at a still-to-be-determined midpoint pivot ('p') like the one shown.

The daily chart (see inset) offers a simple picture of a bull market that appears rested and ready to embark on a powerful new rally. The move could carry to as high as 2228 in the weeks ahead -- equivalent to about 1000 Dow points.  Notice that the futures stalled in late December in their first encounter with the red line, an important midpoint Hidden Pivot resistance. But two months of noodling around has evidently left buyers raring to go. The last three days have seen a modest push above the pivot, but the breach does not yet appear sufficient for us to infer that a finishing stroke to the target is a done deal. All bets would be off if the dollar breaks out of an apparent consolidation pattern of its own, since the deflationary pressure that would exert on financial markets would generate the kind of headlines that even The Bull That Would Not Die couldn't shrug off.  Dollar worries aside, and despite the bullish look of the chart, I am wary of a bull trap and will be monitoring the E-Mini's vital signs intraday, since the failure of a minor, intraday rally to achieve a Hidden Pivot target could hint of trouble. I'll also be looking for a low-risk buying opportunity if the futures should pull back to the red line after making perhaps 10-15 more points headway. Stay close to the chat room if you're interested.

Night owls may have a shot at the rally setting up Monday night on the lesser intraday charts. I'd wait for a second or even third point-C low before attempting a camouflage-type entry from the long side, however, since DaBoyz may be a little skittish about launching an after-hours rally on the heels of a correction that dragged on until the final hour of Monday's session. Alternatively, and unlikely as it seems at the moment, if the futures dip beneath the 'external' low at 2095.25 that I've labeled in the chart, that would turn the lesser charts short-term bearish. _______ UPDATE: The rally went according to plan, with a final point 'C' low at 2102.75 in the first 30 minutes of the regular session. Entry was at 2104.75, although you'd have needed an HFT machine to get aboard. Of all the vehicles that are easy to read, this one, a mirror image of the 50,000 whack-jobs who follow it, remains the hardest to actually trade.

Given the clarity of the 2105.00 rally target we've been using for a while, I'd be very surprised if an important top did not form near current levels. As a practical matter, however, I wouldn't suggest letting the short position we initiated on Friday run against us much more than it already has. Specifically, I'll recommend covering the short Sunday night or Monday morning if the futures touch 2110.25. You can re-short at the 2117.25 target shown, stop 2118.25, but there's no point in the interim letting our existing position run seven more points against us, which it very likely would if 2110.00 is touched. Additionally, you could get long "against the box" with a mechanical buy at p=2099.00.  A 2096.25 stop-loss would apply, o-c-o with an order to exit profitably at 2117.00

We exited four calls yesterday for a loss that could have been as much as $150 or as little as $50, depending on which strike was held. TLT looks like it could fall further over the near term to the 124.51 Hidden Pivot support shown. Since my bullish long-term outlook for T-Bonds is unchanged, notwithstanding the nastiness of this correction, I'll recommend bottom-fishing again via the purchase of four March 13 127 calls with TLT trading within 0.04 of the target. Try to position your bid so that it is midway between the reflected bid and offer, and stop yourself out of the position if the stock touches 124.39. I don't recommend buying the options by paying the offer. Here's why.  Let's say the options are quoted at 0.88-0.98 as TLT closes on the 124.51 target. If you pay 0.98 for them and the stock falls just a little further, to 124.39, you would find yourself hitting a bid of perhaps 0.83 to exit the calls. This implies an instant, 0.15 loss on each option even though the underlying stock has barely exceeded our target. Better to forgo the trade than to expose yourself to such risk. This is, after all, a speculative bet on picking the bottom at a minor Hidden Pivot support. If we miss the low, there will always be another opportunity to get aboard, even if at a higher price (where entry risk might be smaller). Here is one further strategy for getting long in TLT that I posted in the chat room: "If you want to try getting back in, I'd suggest doing so with an uptrending 'camouflage' ABC from just beneath Tuesday's 125.92 low. TLT may or may not fall to the 124.51 target, but my strong gut feeling is that it will at

Although the futures have made almost no headway since last Friday, somehow they still feel unstoppable. In any event, the March E-Mini contract looks to be on track for a rendezvous today with the 2105.00 target shown. This Hidden Pivot resistance happens to coincide with The Target That Dare Not Speak Its Name, providing us with a possible opportunity to short it without getting nervous about its potential importance. I'll suggest doing just that, stopping a one-contract position at 2106.25.  You can step up the size if you initiate the trade using 'camouflage', or if you've been on board for the implied rally to the target. But don't worry too much about competition, since I doubt that 2105.00 looms large among traders. _______UPDATE: Zzzzzzzzzzzzzzzzz.

In a small way, the futures have turned impulsively bearish on the hourly chart. I won't go out on a limb even slightly, however, since it's hard to tell what DaBoyz might have on their thieving little minds following the three-day holiday weekend.  Traders should plan on getting short at the target that dare not speak its name, but don't hesitate to nudge me in the chat room if you need guidance in real time. The width of the stop-loss should be based on any success you night have catching the implied ride north. As of Tuesday night, I would suggest doing so using a midpoint support or D target similar to the one I've sketched hypothetically in the chart shown. _______ UPDATE (February 17, 6:42 p.m. EST): Zzzzzzzz. No change.