Full Steam Ahead For Stocks (But Look Out For 1617.48)

As of yesterday, Cyprus was on its way to becoming a distant concern, pushed off the front page by news about New Jersey’s $338 million Powerball winner and the Supreme Court’s likely endorsement of same-sex marriages. And yet, with euroland’s latest banking crisis out of the way for now, investors acted surprisingly subdued yesterday, pushing the Dow to a modest gain of 113 points.

Our guess is that Wall Street is quietly gearing up for a rip-roaring short squeeze to finish out the week. The broad averages have been hovering near record highs to begin with, but by the time Friday rolls around, we’re betting that stocks will be trading well above these levels, demonstrating yet again that investors haven’t a care in the world.

The flip side, unfortunately, is that gold prices are about to head lower, having failed to register much of a pulse even during the most worrisome phase of negotiations to “rescue” the Bank of Cyprus.

Not to rain on speculators’ parade, but here’s a number to watch if you’re crazy enough, after all these years, to still be looking for a top: 1617.48, basis the S&P 500 Index. That’s a proprietary Hidden Pivot target of ours (see chart above), and although we must concede that no such target that we’ve proffered over the last four years has shown fatal stopping power, this one seems likely to produce at least a short-able high.

The purpose of these Hidden Pivot numbers is not only to provide precise swing points to get short or long, but to gauge the strength of the underlying trend. In this case, and generally speaking, if a clear “hidden” resistance such as this one gives way easily, it is a sign that considerable buying power remains to be spent. Thus, we would regard an easy move through 1617.48 as strongly implying that no end is in sight for the bullish rampage.

One more thing: the target is also our minimum upside projection for the near term. Under the circumstances, any trades we recommend will be from the long side.