The ostensibly bullish pattern shown looks primed to fail, but I am featuring it anyway because it looks almost too 'textbook' not to work. Almost. Granted, winning 'mechanical' set-ups are supposed to seem scary when they trigger, but in this case we'll pass up the opportunity and watch from the sidelines. Were so promising a pattern as this to seven out, it would add to the evidence that the bear 's full fury is not yet spent. Nor is it a sign of good health that a downside target at 3850 that had been five months in coming has produced a measly 10% bounce. Here's a chart for the September contract if selling spills into the new week. The downside target is 3708.50, and judging from the way bears crushed the midpoint support on Friday, it will be achieved. ______ UPDATE (Jun 15, 12:24 p.m.): The 3708.50 target caught the exact-to-the-tick low of this week's 200-point avalanche, enabling numerous subscribers to report instant, substantial profits in the Trading Room. The bounce so far has been 55 points, but bulls should be troubled that it wasn't twice that. We'll give it another day to see if short covering can do what bulls evidently cannot. _______ UPDATE (Jun 16, 10:22 p.m.): Bulls will have a chance to turn things around at p2=3678, but if this feat of engineering fails on a Friday as seems likely, look for more slippage to the 3502.00 target. A tradeable bottom is likely if that target is achieved.
The futures wasted a week of our trading lives screwing the pooch, failing even to trip a 'mechanical' buy at the red line, let alone at the green as we prefer. This implies that Friday's weakness was just noise and that ES remains bound for the 'D' target. I've raised it a tad, to 4309.00, to correct an inscrutable error that I blame, as I am wont to do, on quirks in the Tradestation platform. You can use 4309 as a lodestar for bull trades, since the implied 200 points of upside leaves plenty of room for profit. The pattern looks too obvious, even though it's a reverse ABC, to allow a precise and painless short when D is reached. However, I still like it as a place to attempt shorting, and I would therefore suggest using a 'camo' trigger on the very lesser charts when the time comes. Stay tuned to the chat room and your email 'Notifications' if you would like further guidance on this. Please note that the unexpected swoon to x=3932.88 would trigger an enticing 'mechanical' buy, stop 3807.00. ______ UPDATE (June 6, 5:21 p.m.): Cancel the trade, since there's not much swooning going on. It could be distribution, actually, and there's no point in exposing ourselves to it. _______ UPDATE (Jun 10, 12:13 a.m.): A drop to the green line (x=3932.88) would trigger a 'mechanical' buy, stop 3807.00. I am not recommending the trade, however, even executed with 'camouflage', because of how sickly the futures looked all week. Ahead of the weekend we should be doubly cautious.
Use the 4305.50 target shown as a minimum upside projection for the week. There is little doubt the futures will get there, given the way short-covering speared the midpoint Hidden Pivot resistance at 4058 toward the end of the week. Retracements were non-existent, leaving bears hanging on the ropes ahead of the three-day holiday. A move to the target would leave the June contract in an interesting place, just above three middling 'external' peaks made in late April and early May. Since every chartist will read that as a bullish breakout, we'll look to exploit the obvious if it doesn't pan out as anticipated. Even if it does and the futures shoot higher, there may still be a discomfort-zone opportunity to get short at higher levels. 'Mechanical' buys would be signaled on a pullback to p=4056.50 or, less dangerously, to x=3932.00. Either trade would demand 'camo' risk control, since the implied entry risk on four contracts is more than $12,000.
The most bullish thing you could say about this sack of cement is that the May 16 low at 1785.00 did not quite reach its 'D' target. That's why I am returning to a big-picture pattern that is bullish, even if its 'D' target at 2075.41 greatly exceeds our expectations at the moment. A theoretical 'buy' that triggered last week implies a rally over the next 5-7 days to p=1930.20, the pattern's midpoint Hidden Pivot. We'll be better able to judge whether the move is likely to hit D once we've seen buyers interact with that number. If it is impaled on first contact or the futures close above it for two consecutive days, that would shorten the odds of a continuation to 2075. ______ UPDATE: (May 31, 10:39 p.m.): Today's funereal price action raises the question of whether the future can even reach the midpoint pivot, let alone interact with it. The theoretical buy signal is still in effect, although there is no good reason to actualize it. The good news is that gold will rally, although not too far, once we have become despairing of the possibility.
There is nothing exceptional about the pattern shown -- except that this is not the bearish chart of some $50 stock, but rather a tradeable proxy for vast sums of money. Size should have no bearing on the odds of a further fall to D=3650.25, implying that vast additional sums of money are likely to vanish shortly from the ether of the global financial system. The week ended following a stab well beneath a major downside target at 3850.00. Although a vicious short squeeze to 3902.00 reversed the loss, the technical damage is irreparable and implies a continuation of the downtrend. The steepness of the squeeze has made Sunday's opening unpredictable, even if we 'know' this rally will be a short sale at some point. Also, p2=3761.44 promises to be an opportune spot for bottom-fishing when it is reached. ______ UPDATE (May 23, 8:15 p.m. EDT): Use this reverse pattern, with a 4048.50 target, to exploit this vehicle. An overnight pullback to the green line would signal a 'mechanical' buy, stop 3808.50, but you could attempt it at p=3928.50 if your 'mechanical' chops are up to speed, _______ UPDATE (May 24, 6:54 a.m.): Hard selling overnight has pushed the futures down as much as 60 points, but there was no 'mechanical' buy at p because the rally never reached p2 first as required. The bottom-fishing tactic is still valid at x=3868.69, but because it carries theoretical entry risk of $3,000 per contract, I'd suggest the trade only if you're able to cut that to $300 or less. If I'm in the chat room when the trade ripens, and it will, I'll provide explicit details for effecting a camouflage entry. ______ UPDATE (May 24, 9:38 p.m.): We missed a nice trade when the futures plummeted 66 points in the early going but failed
The shallow correction off a targeted high at 1846.00 portends another burst of strength this week. That's assuming one of gold's notorious mood changes doesn't occur when trading resumes Sunday evening. A strong upthrust should be presumed bound for the 1894.80 target shown in the chart. This is a 'reverse pattern,' and levels 'p' and 'x' should be suitable for bottom-fishing with 'mechanical' bids. Stay tuned to the chat room and keep email notifications switched on if you want to stay apprised. ______ UPDATE (May 25, 4:20 p.m.): The burst of strength has turned leaden. We won't give up on this glue horse yet, though, since it may simply need to consolidate for a bit longer after last week's sprint.
The pennant formation shown is building a base for June Crude to pop to as high as 146.42. This seems incredible and goes against the grain of my recent forecasts, which have implied that crude topped at $121 in March. Even so, I'm forced to consider the possibility of a powerful upthrust, based on the purely technical evidence in the chart. Such a move would not likely be caused by a surge in the global economy, which appears headed toward deep recession. It would also be bucking deflationary headwinds that will continue to mount as higher interest rates crush borrowers. The only way crude could get to $146 is with a massive disruption of the distribution chain such as war might cause. Is the chart predicting a geopolitical conflagration? So it would seem.
Friday's bear rally was not particularly impressive, and we could probably write it off had it occurred on any other day of the week. But because it left shorts bleeding on the ropes ahead of the weekend, they are likely to provide buoyancy when index futures resume trading late Sunday afternoon. The three labeled peaks will pose an immediate challenge, but we should expect them to give way if there is no particularly unsettling news over the weekend. If you or I were the criminal masterminds who rig the markets, this is how we would set things up to maximize the power of short-covering and other buying behavior related to the calendar. Short-covering rallies are engineered to achieve heights that mere bullish buying never could, and that's why we we should expect the rally to continue. For now, use the 4102.00 'D' target of this reverse pattern as a minimum upside objective. The Hidden Pivot levels can also be used for 'mechanical' entries or to get short at D. If it's easily exceeded, bears may be facing a tough week. ______ UPDATE (May 16, 5:35 p.m.): Buyers went nowhere, but that was impressive, given the quickening drumbeat of news concerning the implosion of China's economy. Use this pattern, a slightly evolved version of the one above, with a 4102.00 rally target. _______ UPDATE (May 18, 1:15 p.m.): Minor downside targets have supported only feeble bounces so far (see my 10:06 rec in the Trading Room), but the p midpoint of this pattern will likely work better. Today's decisive move below 'x' implies that 'p' is all but certain to be reached. I am not publishing the actual price associated with p to avoid making it too visible._______ UPDATE (May 18, 6:12 p.m.): Here's my third correction of the bearish pattern, with a
There's a Hidden Pivot support at 1757.40 to break gold's steepening fall, but then what? A tradeable low seems very likely to occur there, or somewhat lower near one of several 'external' lows that stairstep down to 1704.30. The downtrend could even end with Friday's 1797.20 low, the pattern's 'secondary' pivot, but I wouldn't count on it. The futures are certain to be volatile and therefore tradeable while they carve out a bottom, but opportunities will necessarily be labor-intensive and short-lived.
The chart shows the tortured psyche of a bear market in its infancy. There have been no particularly memorable downdrafts yet, just a paltry three-percenter in the Dow last week that was overshadowed by an even more-deserved sell-off in the lunatic sector. There is only discouragement and anxiety at this point, but no real fear. And why should there be? If Thursday's psychotic, Fed-induced short-squeeze had continued for just one more day, it would have brought the S&Ps to within betting distance of new record highs (!). As things stand, it scared the bejeezus out of traders who'd grown too comfortable shorting into every rally that occurred in April. For trading purposes, continue to use the 3994.75 target as a logical place for a tradeable low. It has grown too well exposed by now to work precisely for bottom-fishing, but price action there will at least give us a firm handle on the downtrend's strength at this very early stage of the bear. _______ UPDATE (May 9, 5:26 p.m. EDT): The futures dove to the 3994.75 target this morning, then spent the rest of the day screwing around with it. The close was beneath this Hidden Pivot support, however, following a 3970 low that represented more than just a slight breach. Accordingly, I've shifted point 'A' up to the marquee high to produce a still lower target at 3921.75. That will be the end of the line for the bear cycle begun from 4800 on January 4, so look for a long, sustained bounce after 3921.75 is touched or very closely approached. (The bounce may already have begun, but I doubt it. ) D=3921.75 can be bottom-fished with a 'camo' set-up, since it is extremely unlikely to be significantly exceeded the first time it's hit. Here's the chart. _______ UPDATE (May
