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The Morning Line

A Contrarian Play

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Two key rally targets remain, respectively, for the E-Mini S&P and the Dow Industrial Average: 2299.00 and 19727. These Hidden Pivot resistance points do not synch up, for reasons spelled out in today’s touts. In fact, if the S&P futures were to reach their target, the Dow would be trading for around 20,000. Although that last number is not on my radar technically speaking, from a psychological standpoint it would become magnetic and all but inevitable once the Indoos push decisively above 19727. A melt-up on Friday is all it would take. Since no bear would want to take a short position over the weekend, that might be exactly the way to go — i.e., purchasing a few cheap puts as you might a half-dozen lottery tickets.

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Touts

$+ESZ16 – December E-Mini S&P (Last:2248.25)

EST

target-with-some-heftIt’s always exciting to watch the S&Ps steal up on an important Hidden Pivot target that has been months in coming. This time there were two of them, at 2240.25 and 2250.00 respectively. When the dust settled on Thursday, the futures had slightly exceeded the latter with an intraday high at 2251.50. The pullback that followed was barely a retracement, however, and that’s why I hesitate to infer that the TrumpSanta rally is over. If not, there is yet one more target of immediate consequence left — at 2299.00 (see inset). The problem is, if the futures get there, the Dow Industrials would be trading at 20,000, which is 273 points above the very highest target I’d allowed for this run-up. How do I reconcile the discrepancy? My instinct is to assume that the Dow is headed to 20,000, and the E-Mini S&Ps to 2299.00. That would put them back in synch of a sort — i.e., at round-number resistance with the heft to stop a bull that has been charging hard since 2009.  And what if the Dow blithely blows past 20,000? I’d have to side, at least until my technical indicators tell me otherwise, with lunatic-fringe bulls who seem to think 20,000 will provide just another launching pad rather than daunting resistance. My E-Mini S&P target at that point would be 2417.50 –equivalent to around Dow 21000. And above that? More than likely, we’d be looking at four more years of the Trumpster. (Trading note: Our tracking position still holds one of four contracts originally acquired for 2185.75. Imputing partial profits booked on the way up yields a cost basis of 2087.25 and a theoretical gain on the trade of about $8000.)

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SIH17 – March Silver (Last:17.235)

EST

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$+DIA – Dow Industrials ETF (Last:196.50)

EST

Wednesday’s wilding spree allowed subscribers to close out all but one of eight Dec 9 192.50 calls purchased on November 21 for 0.34. The intraday high for the options was 3.05, but as is my practice, I’ll use the worst price reported by a subscriber (2.35) to calculate the gain on the position so far: $535. To recount the details since Nov. 21: two contracts were to have been exited at 0.68; two more at 1.12 (with 1.06 used as a basis); two at 1.28; and one more (today) at 2.35. If subscribers were to cash out the single remaining contract at Wednesday’s closing price of 3.05, the total profit on the position would be $840. Some subscribers may have done better, since they reported having done the trade using a multiple of the eight contracts initially specified. With respect to the last contract, I’ll recommend offering it for 5.15, good-till-canceled. That price is pegged to a 19727 DJIA target that I first broached here a month ago, when the Dow was trading 1000 points lower.  Watch for updates, however, since exiting the calls at the best possible price could be tricky if we have to do it on Friday, when the options expire. My instructions for this trade have been detailed and explicit because the trade was intended in particular for subscribers who have never had a winning option trade. _______ UPDATE (Dec 8, 1:17 p.m. ET): ES 2250 and DJIA 19727 are targets somewhat out-of-synch, as you will have surmised. To play it conservatively, I’ll suggest cashing out the last DIA call now. They are quoted at 3.95/4.20, so offer them at 4.05, or in-between the bid and offer if they shift higher or lower. _______ UPDATE (9:42 p.m.): Acting on an intraday alert, subscribers blew out the remaining call(s) for as much as 4.15. Using a low-end price of 4.00 reported in the chat room, those who followed my instructions explicitly (as many of you evidently did) would have come away with a total gain of $935 less commissions for each eight calls originally acquired.

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CLF17 – January Crude (Last:50.91)

EST

one-heckuva-dead-cat-bounceWe have rally targets outstanding that range as high as 55.93. However, because we prefer to take our targets one at a time to avoid focusing on the wild blue yonder, we must reckon with the fact that crude’s impressive-looking surge from around $45 in the last week has fallen somewhat shy of a lesser Hidden Pivot target at 53.35. This suggests the upthrust, although steep, is not as powerful as it might seem. In fact, the move is not even bullishly impulsive on the daily chart, since it failed to exceed the two prior peaks we require to generate a legitimate impulse leg. The rally did exceed one prior peak, but it’s an ‘internal’ one rather than an ‘external’ — another reason why the melt-up is still less than impressive at this point. Buyers need only have pushed the futures a further 27 cents to take out mid-October’s external peak at 52.68; instead, they chickened out just inches from the goal line. While this doesn’t negate the possibility that January Crude is bound for new recovery highs above $54, the subtle weakness should temper our bullish enthusiasm if and when crude reaches those levels.  Could the entire move from January’s lows near $34 have been just a dead-cat bounce? Quite possibly, and that’s why we should pay very close attention to price action at key Hidden Pivot resistance points not far above, as well as to abcd retracements of minute degree. For if they begin to exceed their ‘d’ downside targets, that would be evidence that crude’s massive upward correction in 2016 is at an end, and that a resumption of a bear market that will see crude fall into the $20s is at hand.

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$AMZN – Amazon (Last:759.39)

EST

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$HGH17 – March Copper (Last:2.6430)

EST

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DXY – NYBOT Dollar Index (Last:100.63)

EST

head-and-shoulders-top-in-dollar-yeah-sureWhen you look at the accompanying chart of the U.S. Dollar Index, do you see an ominous head & shoulders pattern?  If so, you’ve probably got plenty of company, including dollar bears and chartists who see bogus H&S patterns everywhere they look. I mention this because those dollar bears have ratcheted up the hubris in recent weeks for the usual stupid reasons: collusion by America’s enemies to usurp the dollar’s unshakable global hegemony; an imminent outbreak of inflation; an overdue bear market; seignorage envy. The usual claptrap. When I look at the chart, however, I see a rally so powerful that it not only blew past centennial resistance and a daunting Hidden Pivot at 100.55, it is now tap dancing on those erstwhile obstacles as though intending to launch powerfully anew. Don’t get me wrong, the dollar could still pull back, perhaps sharply, before it embarks on a renewed tear toward targets as high as 120 that I’ve broached here, and in countless interviews, before. From my technical perspective, insatiable dollar buyers from around the world have made chop suey out of an erstwhile granite ceiling. So color me bullish — and a deflationist until the cows come home.

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$GCG17 – February Gold (Last:1169.20)

EST

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$AAPL – Apple Computer (Last:111.01)

EST

decisive-push-by-aaplApple is no longer a bellwether stock, just a gigantic, non-innovator that sells a lot of pricey computer hardware and gratuitous new versions of its smart phone. Even so, because of its enormous capitalization and heavy institutional sponsorship, it needs to be in bullish gear for the broad averages to move higher.  Instead, the stock has been marking time for six straight days, providing neither leadership nor inspiration for traders who might otherwise be coaxed into buying something, anything. My hunch is that AAPL will take the path of least resistance and head lower if it can’t close above the 111.89 midpoint pivot shown by Thursday. If AMZN, too, heads lower, look for a not-so-dull ending to what so far has been a tiresomely dull week. _______ UPDATE (Dec 3, 12:39 p.m. EST): A retracement to the 105.32 midpoint pivot shown could provide an enticing buying opportunity. Until then, sit tight. _______ UPDATE (Dec 6, 5:36 p.m.): AAPL has generated a minor, bullish impulse leg on the lesser charts that projects to 110.58, or to 111.30 if any higher. On the 15-minute chart, you can replicate the pattern using these coordinates: a=108.97 (12/5 at 3:45 p.m.); b=110.36. _______ UPDATE (Dec 7, 8:57): Today’s modest thrust stalled precisely at a midpoint pivot that lies millimeters from the 111.30 target noted above. Now, if AAPL can push above p=111.18 by at least 5-6 cents, the stock would become a good bet to reach the 114.11 target shown (see inset, a new chart).

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$+TLT – Lehman Bond ETF (Last:119.60)

EST

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$DJIA – Dow Industrial Average (Last:19615)

EST

your-road-map-for-tradingThe chart included with yesterday’s DJIA tout showed a big-picture pattern going back to early 2016 that projects to as high as 19727. This one, tracing back to early July, points to a somewhat less ambitious target at 19489.  It is more suitable for trading because Hidden Pivot levels x, p and p2 are closer together, yielding theoretically lower-risk ‘mechanical’ entries from any of the three levels.  It has also been loosely confirmed by an intraday high on Wednesday at 18650 that fell within spitting distance of the 18686 midpoint pivot. The Indoos will have to breach it decisively to become and odds on shot for a run-up to 19489, so we’ll wait and see what happens before we look for opportunities. Stay tuned to the chat room for guidance in real time, since the any trades will require interpolating the various levels using DIA. A possible play might involve, for instance, legging into a vertical call spread pegged to the 195 strike once 186 has been exceeded. _______ UPDATE (Dec 7, 8:59 p.m. ET): Today’s decisive thrust past 19489, my minimum upside projection for the last month or so, has put the 19727 target solidly in play. I’ll recommend shorting there with a tight stop (using DIA, perhaps, or the Mini-Dow futures) only to traders who have been long for at least part of the ride higher. _______ UPDATE (Dec 8, 9:59 p.m.): If the Hidden Pivot resistance at 19727 fails to contain this binge, we’ll soon be looking at 20000. As I’ve noted above, that would be congruent with a 2299.00 target still outstanding for the December E-Mini S&P.

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