E-Mini S&P

The futures overshot a compelling Hidden Pivot rally target on Friday, but I'm going to allow for the possibility that an alternative target worked precisely and could mark an important top. Both targets are shown in the chart, and although the higher of them, D2=1923.25, is not one that I would typically take seriously because it is derived from a 'too-obvious' low at 1803.25, I'm inclined to give the pattern the benefit of the doubt nonetheless because of the nasty reversal in momentum stocks late in the session.  If D2 is exceeded by more than perhaps 2-3 points, however, a Hidden Pivot rally target at 1954.25 will be in play. Although I had suggested here earlier that the high-fliers, particularly AAPL, might pull the stock market higher, we'll have to wait and see whether the opposite holds true -- i.e, that either the world-beater stocks pull the broad averages down; or that the broad averages pull the world-beater stocks up.  Interesting times, in any event. _______ UPDATE (10:06 a.m. ET):  Bulls have gotten sucker-punched by DaBoyz yet again as the futures fall hard from a marginally positive opening. The actual peak was at 1924.25 -- not far enough above the 1923.25 pivot to 'actualize' the bullish scenario discussed above.

The potentially very important rally target that I alluded to in 'Today's Action' is shown in the accompanying chart. Like so many other interesting charts that come to my attention, this one surfaced serendipitously last night in response to a question asked during the final hour of the Hidden Pivot Webinar.  Notice that the intraday high at 1918.00 occurred just three ticks above the target, a Hidden Pivot at 1917.25 that had been six weeks in coming. In retrospect, and even with Apple on a holy tear, the target was speculatively shortable in small size. This is notwithstanding the fact that I almost never advise taking a position in the final hour.  Looking at this chart with mechanical detachment, I'd say that if the futures rally just three or four points above the target, it is kaput.  The pattern is so pretty and precise that it should work with that kind of precision. However, an overshoot wouldn't mean the Hidden Pivot has not 'worked' -- only that the rally is sufficiently powerful to turn even the hardiest of Hidden Pivot resistances into chop suey.

The latest E-Mini tout could have been worth as much as $1200 per contract to anyone who was paying attention and prepared to act. Specifically, with the futures trading around 1898.00 Monday evening, I suggested getting long for a rally to exactly 1913.50. I further recommended getting short at that target, a Hidden Pivot resistance, using an ultratight, three-tick (!) stop-loss at 1914.25. In the actual event, the futures rallied to an intraday peak at precisely 1914.00 yesterday morning, then dove to 1905.00 in the first hour. Here’s the actionable portion of the recommendation exactly as it appeared: ‘Traders should use the 1913.50 target shown as a lodestone on Monday. The opportunity to get long ahead of the move may pass with Sunday night's session, but you can try shorting there in any case with an initial stop-loss at 1914.25.’ If you think you could have handled those instructions, consider giving Rick’s Picks a try. You can sign up for a free two-week trial – no credit card necessary – by clicking here. Incidentally, the 1913.50 rally target was a month in coming, so I don’t expect it to be a pushover. My guess is that it will take at least 4-6 days for short-covering – the only source of buying power left in this grotesquely overextended bull market -- to chew through it. However, if the resistance were to give way in a mere 2-3 days – say, by no later than Friday – bears should dive for cover, since the easy move into record territory would suggest buyers revving up to cripple and maim shorts.

Traders should use the 1913.50 target shown as a lodestone on Monday.  The opportunity to get long ahead of the move may pass with Sunday night's session, but you can try shorting there in any case with an initial stop-loss at 1914.25. If the futures take out the stop, look for further, albeit limited, progress to the 1917.25 target of the larger, alternative pattern shown. _______ UPDATE (10:36 a.m. ET): This trade worked beautifully, since the futures peaked at 1914.00 just before dawn. I suggested covering half of the position in the chat room with the futures down near 1906.00. However, if you shorted only a single contract, or have already taken a partial profit, implement an impulse-leg-based stop-loss on the 5-minute chart. At the moment, that would imply stopping yourself out on an uncorrected thrust that exceeds two prior peaks, including one at 1911.50 recorded at 9:55 a.m.  If I hear from two people in the chat room who got short and who are still short, I'll establish a tracking position.

All signs were pointing higher at the close, which means there's probably about a 65% chance that stocks will head lower on Friday. That's the way things have played out on most days in recent weeks: The more bullish stocks looked at the end of a session, the worse they tended to open the next day. Factor in the undesirability of taking positions ahead of a long holiday weekend, and you're probably better off flipping a coin or casting the I Ching than trying to guess what the charts portend.  This won't necessarily preclude nimble day trading, but don't expect to surf a big wave.

A breach of the 1865.25 midpoint support (red line) would imply more downside over the near term to its 'D sibling, 1857.75, or to 1855.00 if any lower. The second target comes from 'A2' and can be bottom-fished with an initial stop-loss at 1854.25.  A single contract is suggested, but you can increase the size if you use 'camouflage' to get aboard. The higher target can also be bottom-fished, and an 1857.00 stop-loss is suggested. _______ UPDATE (9:57 a.m. ET): The futures opened with a bullishly impulsive short squeeze after having gone no lower overnight than 1866.50.  They were up the equivalent of 100 Dow points 30 minutes into the session, but don't expect this gas-bag to get much further.

Bulls made lazy by the impending Memorial Day holiday aren't entirely to blame for yesterday's somnambulant rally.  Turns out the intraday high closely coincided with the respective 'D' targets of two ABC rally patterns. Double stopping power.  The larger and more important of the targets is shown in the chart, but there was also a minor 'D' Hidden Pivot at 1882.50 (labeled in purple) that was flagged in the chat room and which ultimately was exceeded by two ticks.  Although the rally was from Dudsville, it should be presumed self-sustaining for at least another day or two, for a couple of reasons. For one, shorts were pinned on the ropes the entire day, there having been no pullbacks greater than four points; and there they remained at the closing bell.  For two, the Masters of the Universe left nearly 20 points of running room between the end-of-day settlement price and new record highs. This means They can manipulate this vehicle at least somewhat higher Tuesday on merely vaporous buying before traders start feeling jittery about what might happen when it wafts into record-high territory again.  The last several such forays have been swiftly rebuked, and although seasonality will strongly favor the bulls ahead of the holiday, buyers could just as easily turn skittish on the realization that they've hoisted this erstwhile cinder block just a scoach higher than whatever the day's headline hum-drum might properly allow.

Short-covering recouped only half of the Thursday's losses --a particularly timid showing for a Friday. Since the subtle delicacy of my last trading idea was trashed by the indelicate thrashing of bulls and bears trying to knee-cap each other ahead of the weekend, I am not going to offer any clever day-in-advance suggestions for Monday. Suffice it to say, Thursday's downdraft created a bearish impulse leg on the daily chart that was still very much in effect at the final bell, even if buyers were momentarily on-the-ascendant.

The picture-perfect downtrend shown in the chart could easily get bent out of shape by the time you read this, but the single-bar coordinates that define it thus far look promising for helping us determine whether the selling is likely to continue or perhaps even gain momentum. Bulls should be hoping for a bounce from a p midpoint support that is yet to be determined, since that's what bull-market corrections tend to do.  But if the midpoint pivot should be easily exceeded, or, heaven forbid, the D target of the pattern gets obliterated, it could spell big trouble for bulls. Traders can bottom-fish at p or D, but if at the higher number, camouflage is advised, since it closely coincides with the billboard-obvious low recorded on May 7.