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From the monthly archives:
March 2009
With the July 115-April 115 call spread trading currently trading for 8.15, we have a nice cushion in our position, since we legged into the spread twice for 6.00. We also shorted an extra April 115 call for 3.80, so our paper gain is about $320 if you count the two April 90-85 put spreads we also hold twice for 1.20 as a scratch. Concerning the stock, it looked bound for a Hidden Pivot support at 99.42 when the bell rang to end yesterday’s session, or to 97.67 if any lower. Let’s buy two round lots of stock if GS trades at the lower target today, stop 97.59. This can be done independently of any other positions you may already be holding. ______ UPDATE: The correction went no lower than 100.46 overnight, so we did nothing on the order. The good news is that with Goldman creeping toward the 115 strike and the month of April just hours away, our spread position is fattening just as we might have expected. It could be exited for as much as $10 at the moment, yielding an $800 profit on just two spreads, but we’ll let it ride for now, since 115 may act as both a magnet and a leash on the stock.
I like the 12.865 target shown in the chart for bottom-fishing, since the ABC coordinates are subtle and unintuitive. This one is for night owls, and the odds that it will work are going to improve if the futures don’t wander above 13.070 Monday night. An initial stop loss as tight as 2-3 ticks is advised, but you should switch to a 3-cent trailing stop if the expected rally exceeds 13.085. _______ UPDATE: The Hidden Pivot at 12.865 proved far too delicate for this morning’s uninhibited swoon, so anyone who took my advice would have been stopped out for at least a few ticks. The rebound has been unimpressive and has yielded no further opportunities of consequence this morning.
The 894.80 downside target given here yesterday is still viable and remains my minimum objective for the near term. However, if the futures are going to get out of jeopardy, they’ll need to touch 936.80 by day’s end. The key impediment to this feat lies at exactly 925.10, so any thrust that exceeds that Hidden Pivot resistance by a point or more shouldbe taken as an encouraging sign.
The impulse leg highlighted in the chart looks very promising for night owls, even if a point ‘C’ high has not yet been established. If the so-far high at 790.00 endures, however, I’d suggest bottom-fishing at 778.25 (the midpoint Hidden Pivot) using a two-tick stop-loss. If the futures waft higher Monday night, the midpoint gambit will remain appealing as long as ‘C’ is no higher than 792.00 or so. ______ UPDATE: The correction never even got down to the midpoint, even after the midpoint migrated slightly north overnight to 779.50. As of 1:50 p.m., the futures were threatening another assault on bears, chomping away at a 799.75 target that is the highest I could have projected for today using the intraday charts.
As an economist, we rank New York Times hack Paul Krugman right up there with another Nobel prize-winning embarrassment, Yasir Arafat. In the article below, Mises scholar Robert P. Murphy demolishes one of Krugman’s facile, leftist putdowns of Austrian economics.
Look for Friday’s weakness to continue to at least 51.75, a Hidden Pivot target that you could bottom-fish with an initial stop loss suited to your style, but no wider in any event than about 30 cents. If the trade goes in the black by 70-80 cents hang on, since the rally has high potential due to the power of the most recent impulse leg. It went $10, exceeding no fewer than five prior peaks on the daily chart, three of them “external”. _______ UPDATE (10:52 a.m.): Cancel the bid. This morning’s low missed our target by 11 cents, bouncing 36 cents so far from 51.86. The target is still valid in theory, but our bottom-fishing edge has been compromised by a “natural” low that will attract support-and-resistance players and other hoi-polloi.
HUI looks like a good bet to reach 361.53, and possibly 393.88, although the move would be delayed if Comex Gold falls to the 894.80 target projected in today’s tout. A likely place for the implied consolidation to occur would be down around 301.65, the Hidden Pivot midpoint associated with the lower rally target. If HUI were to pull back to that number, we’d be buyers of the index itself, since options on this vehicle are so dead as to be useless. Typically, we would put on calendar spreads at the 360 strike, using long-date options or even LEAPs for the long side of our position.
Is Best Buy’s winning streak over? Quite possibly, since the maximum target we could have projected using the daily chart, 39.28, came within three cents of being reached on last Thursday’s gap-up rally. We hadn’t noticed this potential exhaustion spike until an e-mail arrived from our friend Zane B., who turned bearish on the stock last week. He is evidently itching to buy some in-the-money puts, although our preference would have been to acquire out-of-the-moneys last week when the stock was just inches from the target. BBY’s strength has been based partly on the demise of a major competitor, Circuit City, but the chain may also have benefited from the surprising strength in big-screen TV sales. In any event, let’s bid 2.65 for two June 35 puts (BYYRG), day order, in case the stock feints higher. _______ UPDATE: Fuggedaboutit. Best Buy is getting clobbered with the market today and the puts have traded no lower than 3.40.
Selloff Leaves Delusions Intact
by Rick Ackerman on March 31, 2009 1:47 am GMT
We’ll never be entirely comfortable cheerleading bear rallies, but what else can a guru do when stocks want to go higher for all the wrong reasons? Although shares fell hard yesterday, there was little in the sell-off to suggest that the short-squeeze begun three weeks ago is over. More likely is that the smart money simply fell away on news that the Obama Administration is going to play hardball with the auto manufacturers — or rather, » Read the full article