It has been years since the E-Mini S&Ps created a bearish impulse leg of daily-chart degree. They did so last week, however, with a plunge that breached the required two lows: a small 'internal' from December 10, and the external low at 5921.00 recorded on November 19. The implication is that the urgent short-squeeze rally on Friday will sputter out shortly, allowing the futures to resume their well-deserved slide into hell. It will be interesting to see whether this happens before New Year's, which would be the kind of shocker that takes everyone, bull and short-covering bear alike, down with it. This seems difficult to imagine, given that the rigged support system for the stock market is ubiquitous. It includes Fed funny-money, portfolio managers locked into a handful of high-fliers, and share buybacks by companies with many more tens of billions than they know what to do with. Be patient, permabears. Your day is coming, probably sooner rather than later.
Microsoft would trigger a 'mechanical' buy if it falls to the green line (x=433.65), but I suggest paper-trading this one unless you are an expert because the point 'a' low is so nebulous. I rate the pattern a middling '6.5' (out of 10). Even so, price action at p, even in lousy patterns, is usually useful for analyzing trend strength. In this case, the initial upthrust that impaled p was sufficiently decisive to imply that d=448.70 is entirely likely to be reached. Will the miserable pisher-of-an-'a' change the odds? We're about to find out.
The three-day dance around p=2630.70 left me mildly bearish when the week ended, but not so bearish that I would recommend a 'mechanical' short at the green line. Although the bounce to the line will have occurred off our sweet spot midway between p and p2, the tedious, irregular C-D leg let off enough steam to flatten A-B's bearish energy. That energy is what makes 'mechanical' trades work and the reason why this gambit is unlikely to offer the edge we seek. In any event, the D target at 2500.00 remains my worst-case low between now and December 31. It will also provide good odds for bottom-fishing with a tight stop-loss.
The three-day dance around p=2630.70 left me mildly bearish when the week ended, but not so bearish that I would recommend a 'mechanical' short at the green line. Although the bounce to the line will have occurred off our sweet spot midway between p and p2, the tedious, irregular C-D leg let off enough steam to flatten A-B's bearish energy. That energy is what makes 'mechanical' trades work and the reason why this gambit is unlikely to offer the edge we seek. In any event, the D target at 2500.00 remains my worst-case low between now and December 31. It will also provide good odds for bottom-fishing with a tight stop-loss.
The March contract looked bound for at least p=30.763 when the music stopped on Friday. The pattern is sufficiently clear to keep us confidently on the right side of the trend and allow us to exploit it profitably with relatively little risk. Most immediately, that would imply getting short at p. The trade should be attempted only if you are comfortable using reverse-pattern triggers of small degree (aka 'camouflage'). If the rally hits our sweet spot between p and p2 straightaway and then pulls back to the green line, that would offer a back-up-the-truck opportunity to bottom-fish 'mechanically'.
GDXJ is probably within no more than five points of groping its way to the bottom of the textbook head-and-shoulders pattern shown in the hourly chart (see inset). If it's going to revive sooner rather than later, though, the secondary pivot at 43.44 would be a logical place for this to occur. You can bottom-fish there with a tight stop-loss, using expiring call options if you've got the chops. I've used a dubious one-off 'A' high here, and the pattern could turn out to be governed by the marquee high at 55.58, so plan accordingly.
The Dollar Index pulled back hard on Friday, half-correcting the steep upthrust from two days earlier. Given how the uptrend impaled the midpoint Hidden Pivot (p=107.36), there is little room for doubt about whether D=109.30 will be reached. As noted earlier, that would keep weight on gold. It would also set up a potential 'mechanical' buying opportunity at p=107.36. We don't often do this trade at p, but the trend is so strong that waiting for a relapse to the green line (x=106.39) might leave us empty-handed when the turn comes. _______ UPDATE (Dec 28): The dollar has hovered stubbornly aloft, denying us an opportunity to bottom-fish at the red line (p=107.36). The trade recommendation remains viable nonetheless.
I am playing fast and loose with crude's 'technicals' this week, since chat-room interest in this symbol appears to be dead. As such, I have little reason to provide potentially tradable ABCD coordinates. Instead, here's a perfectly serviceable pennant formation with the January contract falling to around 67.50 before it gratuitously reverses direction. Nudge me in the chat room if you actively trade this symbol and require more-detailed guidance. A bearish bias is warranted, albeit with close attention to the vicious feints and head- and foot-fakes that have always characterized this vehicle's movement.
[The following analysis was contributed by my friend Larry Amernick. His work has appeared here in the past, including excerpts from The Amernick Letter, which is no longer published. He is a former president of the Technical Securities Analysts Association of San Francisco.] Last Wednesday’s brutal response to a mildly hawkish Federal Reserve announcement triggered two opposite market signals. First, the unusual nature of the sell-off in technical terms told us that the great secular bull market that began in 2009 is probably over. Second, the intense selling generated oversold readings that were bound to produce a short-covering rally, as they indeed have. The stock market is always coming and going at the same time, depending on which time frame one is using to measure the trend. It is an irrational and sometimes fragile creature of human emotions, and that's why it can be so difficult to predict. Nevertheless, let’s take a closer look, using the October 1987 Crash for comparison. It turns out the tape was actually more bearish this time, even though losses in percentage terms were nowhere near those of the earlier crash. In 1987, the McLellan Oscillator, which measures breadth, was a scary -110.14; on Wednesday, however, it registered an astounding -203.34. The advance/decline line differential was just as scary: -1921 in 1929 versus -3468 this time. The three-day exponential moving average was -1594.85 versus--2444.89. 3% Versus 22% Why did the market drop a mere 3% on Wednesday, compared to 22% in 1987, even though tape action was arguably worse this time? Although many stocks fell, they did not collapse; they moved only a few percentage points lower. It was the astounding breadth readings that made the difference. Call it a foretaste of what could come in January. For good measure, I have applied a volume
The tightly stopped short I suggested at 6109.00 two weeks ago is holding, since the December contract has traded no higher than 6111.00. It took a nearly 60-point rally to trigger the trade, since the futures were at 6051 when I made the recommendation. Did my target catch an important top? We'll know soon, since the subsequent selloff ended last week just shy of the 6036.50 correction target shown in the graph (see inset). If you've been short for the ride down, cover 50% to 75% at 6036.50 and place a stop-loss at 6085.50 for the rest. If it's hit, that would imply new record highs are coming. Even so, let's be alert to the possibility of a fake breakout that would trap bulls and shorts alike. Alternatively, a two-day close beneath 6036.50 would be reason to take this weakness seriously.
