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 midpoint support too close to last week’s low to consider it reliable for precise bottom-fishing. It may work anyway, but I’d suggest the trade only if you can cut the risk significantly by using a ‘camouflage’ set-up. The pattern will work perfectly well, however, for purposes of gauging trend strength and the likelihood of a further fall to ‘D’. Click on this link or the one above to see both HP levels. _______ UPDATE (May 19, 6:50 a.m.): The strength and persistence of the downtrend continues to impress, now with more evidence that DaBoyz are unable to exhaust sellers overnight. Last night’s plunge somewhat exceeded p=3872.00, eventually finding a presumably temporary bottom in a desperate place, as anticipated, just a split-hair above last Thursday’s low (which itself was a hair above a Hidden Pivot support I’d billboarded). There has been almost no bounce from this very bounce-able spot, and the leadenness feels ominous. DaSleazeball’s firing squad will attempt to corral and frighten as many shorts as possible between now and the opening, but they would need to hoist this sack of bricks above 3900, or better still above the 3933.00 peak recorded overnight, to fool anyone into thinking the rally is going somewhere.
ESM22 – June E-Mini S&Ps (Last:3878.50)
