Euro

On Wednesday the Euro popped up out of its seven-day trading range and will become very bullish if it reaches a "D" target of 1.2971.  If the US dollar heads lower, perhaps in response to non-farm payrolls data, the Euro will go the other way, toward a midpoint pivot at 1.2873 and, if higher, toward a cluster of prior highs dating from mid-August.  These prior levels will be surpassed before the sibling "D" target of 1.2971 is reached, a pivot which is truly in the middle of nowhere and could offer a fine scalping opportunity on the short side.  Another level of importance is the Lindsay point of a daily pattern, just above the 1.2873 midpoint.  This not-yet-active pattern was covered in our Euro tout of September 1.  (Posted by Doug McLagan)

Hidden Pivot analysis gives us key levels to watch on either side of the Euro's eight-day trading range.  On Monday the futures made a low ten pips above the midpoint of a small, bearish pattern on the daily chart.  That midpoint, at 1.2613, remains tradeable with a tight stop.  A print five pips below it would signal further downside to 1.2445.  But if the Euro were to move up and out of its current range, it would cancel the bearish pattern and, by touching 1.2881, confirm a much larger bullish pattern aiming as high as 1.3763.  (Posted by Doug McLagan) ______ UPDATE (2:30 p.m. EDT):  The 1.2613 midpoint is no longer tradeable, as the pattern was broken by today's rally.  1.2881 was not reached, but the Euro impulsed up on the hourly chart.

The Euro will encounter overhead resistance in the $1.31 area due to a Hidden Pivot and a prominent prior high which are close together.  Beginning in late November of 2009, the Euro trended down for at least six months, losing more than 21% of its U.S. dollar value.  But since its June 7 low of just under $1.19, the Euro has been in an important uptrend.  If it can trade through a Hidden Pivot at 1.3092 and past an eye-catching prior high at 1.3101, the June 7 low will start to look like a major trend change.  On the other hand, the "D" target of 1.3092 might be the ideal place for Euro bears to front-run other like-minded traders focused on the prior high just above it.  (Posted by Doug McLagan)

A tout sent out Thursday night caught the high of the day within four ticks, allowing bears to get short ahead of the selloff that ensued. If you followed my advice to-the-letter, a two-contract position would have been stopped out on Friday for a theoretical gain of  $1,350.  However, if you initiated the position on four contracts and continue to hold one for a possible home-run as was suggested, use a 1.2686 stop-loss for now. A trailing stop of at least 35 ticks should be substituted if the futures touch 1.2545 to the downside. _______ UPDATE (July 13, 12:19 a.m.):  You're on your own now, but I'll suggest tying the remaining short contract to a stop-loss triggered by the creation of a bullish impulse leg on the hourly chart. At the moment,  that would imply a rally touching 1.2652, a tick above a distribution shelf created by last Friday's price action.  This is shown in the accompanying chart.

A rally target at 1.2721 that has been coming for a month lies within easy distance of yesterday's highs, and you can short it with a stop-loss as tight as 7-8 ticks. I've used a one-off point 'A' to calculate 'D', but the lowest possible 'A' (at 1.1884) would yield an alternative target at 1.2750.  That's a more conservative place to go short, but the risk is that the futures won't quite get there. ______ UPDATE: A stop-loss as tight as five ticks would have gotten one profitably aboard, since the futures fell 37 ticks after topping in the late afternoon at 1.2725. Cover half the position at will if you shorted more than one contract; otherwise use a 1.2705 stop-loss, switching to a 12-tick trailing stop and a 1.2665 minimum objective if and when 1.2671 is touched. If you shorted four contracts or more, hold onto at least 25% of the original position for a possible home run. You'll be on your own as far as managing the risk, but I'd suggest using the impulse-leg rule to warn of a bullish turn. Officially, we are still short a single contract whose basis has effectively been raised to 1.2782 by the closing purchase of a second contract at 1.269.  FURTHER UPDATE (12:10 p.m. EDT):  The futures fell to 1.2662 before getting any kind of bounce, implying a minimum theoretical gain of $600 if you followed my advice to-the-letter on a single-contract trade.  Officially, we logged a theoretical gain of  $1350 on the two-contract position. If you are still holding a contract for a possible home run, use a 1.2686 stop-loss for now and let 'er ride.

Hysterical short-covering in the euro yesterday is said to have been the cause of yesterday's plunge in commodities, including gold and silver, and the drubbing of the dollar.  The jury is still out on the rally's staying power, however, since it failed to generate a bullish impulse leg on the daily chart (see inset).  That could change as early as today with a push touching 1.2685 -- about 1% above yesterday's high.

The mirage of economic recovery conjured up by our political leaders and a credulous news media dimmed and flickered in the harsh light of reality on Friday, when grim employment figures for May sent stocks into one of their steepest dives of the year. Although 431,000 jobs were added last month, most of the workers were census-takers hired temporarily by the government.  Even that figure evidently was ginned-up, since it appears that many of the workers had been laid off during intervals when there was little to do, only to be rehired later and recounted. But the bottom line for private-sector employment was a paltry 41,000 new hires, the smallest increase since January. Wall Street did not exactly take the news in stride, and the broad averages fell as though the data had caught most traders by surprise. Index futures had head-faked overnight to trap bulls, but by day’s end the blue chip Dow Average was down 323 points.  We would caution bears against becoming overly confident, however, since there are several technical factors coming into alignment that augur a potentially sharp reversal in the broad averages and some important trading vehicles that we track. For one, at Friday’s low of 1059, the E-Mini S&Ps was within 37 points of a longstanding “Hidden Pivot” target of ours at 1022. That’s equivalent to about 300 more points in the Dow, and it could easily be reached this week if sellers continue to hit stocks on Monday morning as they did on Friday. Bullion ‘Vulnerable’ The euro may also be close to an important turn after having been savaged since mid-April, when the currency hovered just above $1.37. On Friday, heavy selling drove it below 1.20 for the first time since 2005. The precise intraday low on the June Comex contract was

We peruse the Wall Street Journal’s stock-market round-up each day not to find out why stocks may have risen or fallen, but to determine what factors are conventionally thought to have caused such price movements to occur.  This is an important concern for forecasters, since, even if one attempts to get a read on the market using purely technical means, it still helps to understand what is on the diseased brains of the coprolagniacs whose job it is to manipulate shares to the certain benefit each day of Goldman Sachs, J.P. Morgan and other officially sanctioned predators of the securities world. The very difficult task of explaining the stock market’s behavior to readers of the Journal falls most often to columnist Peter McKay, and we don’t envy him his job.  Because he works for one the most important and prestigious financial publications in the world, it simply won’t do for him to say, as we might (and often do), that stocks rose or fell the previous day for no good reason at all – or at least, for no reason remotely related to reality. We think celestial factors play a far bigger role in this than mainstream pundits will ever be permitted to acknowledge, and that a gypsy fortune teller is therefore better equipped than the highest-paid analyst on Wall Street to tell us why the broad averages are likely to go either up or down. So why did shares dive in the final hour of yesterday’s session after screwing the pooch for most of the day?  McKay cited two reasons: fears related to Europe’s credit crisis, and to the tighter rules soon to be imposed on Wall Street. With all due respect to McKay, this simply won’t wash.  As we all know, investors fear nothing so much as the

When the euro staged a brief rally the other day, we professed to have been vexed. Why, we wondered, should there be any euro buyers at all at these levels – currently around $1.20 U.S. – when even the village idiot knows the currency is on its way down to 80 cents or lower? Of course, it’s not the little guys who have been goosing the euro into fleeting rallies the whole way down, but rather the central banks. And their perspective is quite different from that of Joe Sixpack;  for although Joe can once again fantasize about being treated like a high roller on the Champs Elysee, and of eliciting smiles rather than scowls from Parisian bellmen, cab drivers and waiters, the central banks of the U.S. and Asia see only a sovereign competitor stealing an unfair advantage over their own exporters. However, we somehow doubt that the folks at Daimler Benz and BMW will see it that way. They and other domestic manufacturers have struggled to hold the line on prices as the euro nearly doubled in value off an 83-cent low almost a decade ago. Now, with currency values being driven by factors wholly unrelated to trade in actual goods and services, the Germans undoubtedly sense that the U.S. dollar will fare no better than any other paper currency over the long run. And so it must be unsettling for them to watch helplessly as the greenback ascends for no good reason, if only temporarily, while the dream of a federated Europe sinks with the euro. Indictment-Proof Assuming they understand this, it seems obvious that the Germans and their eurozone neighbors will sooner or later come to recognize gold’s primacy as money. They quite obviously failed to do so yesterday, however, sitting idly by as the Dark