ESZ12

Although I dissed yesterday's feeble rally attempt in today's commentary, it was nonetheless bullishly impulsive on the hourly chart.  That doesn't necessarily mean it's going to get very far, and we can therefore consider a speculative short at 'D2' of the pattern shown.  I won't task you with camouflaging your way aboard, but your stop-loss should be no wider then three ticks. If you're worried the rally may fall shy of D2, you could try camo-ing your way aboard at p or D, but I'd suggest camouflage at those two pivots. Size:  two contracts.

This flying pig has started generating serially bearish impulse legs on the hourly chart, suggesting that something may be seriously amiss.  A further downdraft today breaching a key 'external low at 1414.50 recorded on 9/11 (se inset) would significantly compound the effect. _______ UPDATE (10:10 a.m. EDT):  Suspiciously, stocks have opened this morning with a less-than-fabulous rally.  When, on a given morning, DaBoyz are unable to squeeze 100 Dow points from spun jobs 'news', look out below.

The futures could do some serious real technical damage to the daily chart with another day of  hard selling. An 18-point downdraft, equivalent to about 150 Dow points, is all it would take to breach an internal and external low, generating the first bearish impulse leg we've seen on a chart of this degree since spring. At that point, subsequent price action at the 'p' midpoint support of the developing downtrend would be crucial to our assessment of the bear's power (see inset).

A very stale rally target at 1477.50 is still viable, although the long wait has made it just a theoretical curiosity at this point. It was confirmed in theory when the low of Friday's selloff came within two ticks of its midpoint sibling, 1450.75.   More immediately, the minor downtrend projects to 1446.00, the 'd' target of the pattern shown.  Because it falls between two distinctive 'external' lows, any bottom-fishing is best attempted using camouflage. Night owls should be alert to a possible upturn from 1451.50, the 'p' of the corrective pattern.

The futures made mincing, tortuous progress yesterday toward 1477.50, a Hidden Pivot target that has grown stale but remains viable nonetheless. Notice in the chart (inset) that Thursday's peekaboo high narrowly cleared September 25's 'external' peak at 1457.00, creating an impulse leg that portends more strength as the week draws to a close.  Crucial to next week's price action, however, is whether this vehicle can do a little better than reaching the  'D target of the small, left-most abcd pattern shown in the chart.  If it can, surpassing the 1462.25 high recorded on September 21 in the process, it would leave bulls in good position to run stocks higher come Sunday evening/Monday.

Yesterday's snoozefest changed nothing in my forecast, which calls for a run-up to 1477.50. From a camouflage perspective, the only 'external' peak that looks suitable for leveraging lies at  1450.00 (see inset).  However, it's close enough to the 'marquee' high at 1451.50 that any entry opportunities are likely to come and go quickly. Under the circumstances, a 'timed' buy-stop should be used to get aboard.

In today's commentary, I said the Dow would turn menacing on an uncorrected drop below 13251.  For the E-Mini S&P, the equivalent shot-across-the-bow would become significant on a print beneath low #2 (1414.50). Eagle-eyed Pivoteers may have noticed that the #2 low on the Dow's daily chart is not a true low, since it is not preceded by the requisite peak. However, the low is quite legitimate here, as you can see for yourself. From a trading perspective, and most immediately, the futures will need to get past Monday's 1451.50 peak before they can break loose for a predicted run-up to 1477.50.  Night owls can attempt to get long via camouflage if this vehicle pulls back in b-c fashion from just above a 1443.75 peak visible on the 15-minute chart (10/2 at 10:45 a.m EDT).

The next thrust should take the futures to the 1477.50 target of the pattern shown.  If achieved, that Hidden Pivot will be short-able with a 1478.25 stop-loss, since it has been corroborated by yesterday's stall precisely three ticks from the sibling midpoint, 1450.75. Larger patterns appear to be working with equal precision, as the chart shows. Notice that after peaking in mid-September at a record recovery high of 1468.00, the futures pulled back almost exactly to the midpoint of the pattern, 1424.75 (the red line).   (In as little as four to six weeks, you can learn to do this stuff yourself. Click here for  free trial subscription to Rick’s Picks.)

The 1411.50 downside target flagged in Friday's update will continue to serve as a logical minimum price objective if its 'p' sibling at 1428.00 gets taken out.  The target is miles from any prior lows, and so it can be bottom-fished with a 1410.75 stop-loss. If the trade fills and survives for perhaps 15-20 minutes, check back here for further guidance.  More immediately, night owls can use the 5-minute chart if searching for a relatively painless way to get short via camouflage.  _______ UPDATE (10:30 a..m. EDT):  The futures went just a tick below p early Monday morning before trampolining 25 points higher.  If you were looking diligently to get long via camouflage, on the one-minute chart, 1429.25 at 1:36 a.m. EDT was the best place to have gotten aboard.