E-Mini S&P

This rabid weasel could turn on us at any time, but for the now we should assume it's bound lower, to at least the 1605.50 target shown. It's not quite a done deal, however, since the intraday low occurred precisely at the 'p' midpoint pivot associated with our target.  If it's breached Thursday in the early going, that would affirm the target and make any feint north a tempting short.  Camouflageurs should look for the opportunity on charts of five-minute degree or less, taking the first signaled entry point if it looks subtle.

As you can see, yesterday's rally was just coitus interruptus, with a frustrating stop at Redfern that just missed going 'impulsive' on the 120-minute chart (and the hourly). Ordinarily that would be the  kiss of death for a minor bull cycle, but my hunch is that buyers will have another run at it unless some horrid piece of news darkens their state of mind on Wednesday. Traders looking for action and adventure may have to zoom down to the one-minute chart -- the only source of 'camouflage', and just faintly so -- to be found late Tuesday night.

Bears shouldn't get their hopes too high, since, as I mentioned elsewhere, an entire week's hard-won losses could be recouped by DaBoyz in mere minutes if a mote of short-squeezable news comes across the tape. That is what they are waiting patiently for, although for the time being there doesn't seem to be enough legitimate buying to hold stocks aloft for more than the opening minutes of a given session.  Notice in the chart that the selloff from last week's highs has exceeded three prior lows, two of them 'externals'. A key battle between bulls and bears lies ahead, at the still undetermined 'p' midpoint support of the hypothetical pattern shown. If this is a bear market a-borning, the support should be obliterated on first contact.  Hidden Pivot scalpers should note that yesterday's best shorting opportunities occurred after the creation of second point 'C'. This is most clearly visible on the five-minute chart.

The point 'A' high shown in the chart is not of the highest pedigree, but I've used it anyway because it corresponds to a p midpoint pivot where the downtrend has stalled very precisely. As always, a move through clear support would imply more downside to the 'D' sibling -- in this case a 1634.50 target that corresponds to a drop in the Dow of about 150 points. Because the midpoint has actually been exceeded by a single tick, traders -- night owls, presumably -- should position from the short side. Shortly before 2 a.m. EDT Monday, there were some serviceable patterns that would have worked, but with no follow-through due to DaBoyz' apparent reluctance to trash the so-far overnight low at 1649.50. This suggests that they are waiting for news to drive shares one way or the other. If the initial move is higher I'd suggest fading it, since bulls have shown no gumption in weeks, and for good reason.

Yesterday's cascade transformed the summer's innocuous, oft-tedious shuffle into an impulsively bearish menace that seems unlikely to recede quickly.  Notice that the selloff exceeded three prior lows on the daily chart, two of them 'external'. This is a powerful 'impulsive' start for bears, and it will likely become still moreso next week if there is only a modest bounce to end this one. Analytically speaking, we'll be best able to judge the bear's ferocity by whatever follow-through occurs after an upward correction. For now, though, we can use 1645.75 and 1629.00 as downside targets. The first number would represent at 0.618 retracement of the record-achieving rally begun on June 24; the second, a 50% retracement of same.

At this point anything could happen on a given day -- including, as I've mentioned in Today's Action -- a short-squeeze rally to new record highs. Under the circumstances, the least speculative play I can recommend at the moment is to bottom-fish the 1673.00 target shown. This one could play out before the opening bell, so night owls should try to stay alert. Camouflage will nearly always be the method of choice for gambits like this one, but in this case, if you choose, you can put up a straight bid for a single contract at 1673.25, stop 1672.25. You'll be on your own if the order fills, but if the expected bounce from the target materializes, a trailing stop (or better yet, an impulse leg-based stop) should be deployed from 1676.25 on up. _______ UPDATE (9:59 a.m. EDT): Such delightful carnage as we have not seen in a long while has lopped 20 points off the futures so far today.  The cascade was interrrupted by a small bounce from exactly 1673.25, but the rally was fleeting and would have been of little value to scalpers. The intraday low has exceeded any target that could be extrapolated from the intraday charts, so we should probably just sit back and enjoy the selloff while it lasts.

Price action of late has been suitable for day traders only, and nimble ones at that.  Tuesday's regular session ended with an impulsive rally that projected to 1701.00. Because the entry signal has already been tripped, the presumptive opportunity will likely be solely for night owls. I'd suggest looking for camouflage on charts of 5-minute degree or less, and to expect to ride comfortably no further than the 1695.75 midpoint resistance. Given the stock market's stagnation during regular hours lately, DaBoyz are unlikely to push for the 'D' target unless helped by a combination of 'good' news and the utter absence of liquidity. If they succeed, look for a further push toward the major target at 1708.75 first broached here some weeks ago. My gut feeling is that a major top is forming, and that is reason enough to attempt shorting -- again, via camouflage -- near that price. ______ UPDATE (8:07 p.m. EDT): Minutes after this tout was published the futures dove beneath the point C low. This will have little bearing on the instructions given above. In fact, after stopping out bulls who had been piling on the bandwagon for the last five hours, the second rally attempt may provide us with a better handhold.

An important Hidden Pivot target at 1708.75 broached here a couple of weeks ago has survived so far, although the selloff since has not exactly been the stuff of bears' dreams. Even so, we can look forward to a bit more weakness today, down to the 1674.00 target shown.  If Mr Market is about to have congestive heart failure, or perhaps a well-deserved stroke, we should look for sellers to turn the target into suet quickly. Even so, the so-far corrective pattern looks good enough to try tightly stopped bottom-fishing there. Camouflageurs should initiate the trade on the one-minute chart or less, notifying me in the chat room of any fills. If you want to skip the  camouflage, bid 1674.25 for a single contract, stop 1763.25. ______ UPDATE (10:57 a.m. EDT):  Oh well. Mr Market once again failed to succumb, turning higher from a low of 1675.25 that cheated us out of a nice buying opportunity.  Is it possible the trained chimpanzees on the trade desks at Goldman and J.P. Morgan know how to identify the most obvious Hidden Pivots, such as the one given above, and are front-running us?  _______ UPDATE (August 12, 9:01 p.m. EDT): My outlook is little changed, although bears will need to respect the bullish impulse leg that resulted from yesterday's gratuitous ups and downs. It projects to 1692.25, but that Hidden Pivot is not very enticing as a place to get short, since it equals a key 'external' peak recorded Friday on the way down (see inset, a new chart).  Night owls will notice there's a possible buying set-up in the ABC pattern that was taking shape Monday evening.

Perhaps it will take more than a stake through the heart to kill this institutionally crazed bull market, since, so far at least, it would appear that the steep downturn in corporate earnings and an abrupt end to the Fed-sponsored real estate boom may not be enough to get the job done.  Still, there is reason to hope Mr Market is in the early stages of congestive heart failure, or perhaps a stroke, since the S&Ps have yet to take out my 1708.75 rally target -- a major Hidden Pivot -- after a week of trying. Another hopeful sign that the bull may be in the process of dropping dead is that the short-squeeze rally that recouped earlier losses yesterday failed to generate a bullish impulse leg on the intraday charts.  Dare we hope that stocks will finish the week with a delightfully nasty and well-deserved plunge?  If so, look for settlement near the 1674.00 correction target shown.  If it happens with a couple of hours left in the session, traders can bottom-fish there with a micro-tight stop-loss commensurate with your skill and daring.