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COMMENTARY for Wednesday
TODAY'S ACTION for Wednesday
Rick's Picks for Wednesday
We caught a nice move yesterday after the futures popped on the opening to exactly where we might have wished. This was a lucky break, and we were able to take advantage of it by going long on the next leg up. The reason the trade worked so well was that the second half of the rally took off without much of a pause, and we were ready for it. If you were impressed by the 40-point thrust, take a look at the chart to see how feeble it was relative to the downtrend that has dominated for so long. It would have to go another 125 points to turn the daily chart bullish. That said, it would take merely a print at 724.50 today to turn the hourly chart quite bullish, since the implied rally will have exceeded two “external” peaks at 723.75 (March 4) and 724.25 (March 2). This seems likely and should temper any bear’s enthusiasm for getting short at the moment. Immediate potential thereafter would be to 736.50, a minor Hidden Pivot resistance.
Shortly after midnight, the futures were working on a modest rally that promised to deliver 903.60 provided a Hidden Pivot midpoint at 900.20 can be surmounted. It would take a bit more than that, though, to turn the 15-minute chart bullish. Specifically, a print at 904.80 would create an impulse leg with the potential to push the futures above Tuesday’s highs near 920. The foregoing does not negate downside targets given here earlier, the lowest of which is 881.90. It can be bottom-fished with a stop-loss as tight as 880.90. There’s a second Hidden Pivot support at 886.40 that is also capable of engendering a tradable bounce, but be ready for more weakness if it’s exceeded by more than a point or so within five minutes of first being touched. Both targets are shown in the chart at left, which is more detailed than the one included with today’s commentary.
We hold the June 25-June 23 put spread, having legged it on six times for a 0.08 debit. This means that although we can lose no more than $48 on the position if the underlying is trading 25 or higher at expiration, we have a chance to make as much as $1152 with GDX trading $23 or lower. The spread is currently bid 0.45 and offered at 0.80, so let’s offer good-till-canceled for a nickel less, or 0.75, just to let the market makers know we’re out there. The stock would have to fall quite hard to get the order filled, but if we could come away with a $450 gain at this time, it would be advantageous to do so. With GDX falling, it will be more difficult to leg out of the position than in because we would need to sell the June 25 puts first, leavking us naked short the June 23 puts. I’ve included a snapshot of TradeStation’s option analysis page that shows the bids and offers for the puts in our position.
“Can Citigroup continue to lift the stock market?” The online Wall Street Journal asked this question in a headline Tuesday night, but you need to look at the chart reproduced alongside to see just how silly the question is. There was a story out earlier Tuesday, during market hours, that noted the stock was up 22% (!!!!!) at the time, but all that means these days is that it has risen by 25 cents or so. From a Hidden Pivot standpoint, a rally would need to hit $4.49 – a gain of more than 300% — for Citi to become even remotely interesting. It is interesting now only because, on any given day, it can be in and out of penny-stock status several times a day.
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Take any dozen good reasons for being bearish right now and they still don’t equal the bullishness of the chart shown. The undeniably compelling rally objective is 13085, a 4.8% move from current levels, and one can only surmise that the dusting the 12158 midpoint received on the last pullback (12/28) all but clinched a finishing stroke to the higher number. Moreover, it implies that bears shouldn’t get their hopes too high even if, in the next few days, the Dow plummets 324 points to retest the midpoint support. As of now, that would signal not weakness, but a screaming opportunity to get long. Hard to believe, really, but that’s what the charts say.
INTRADAY TRADING NOTES for Wednesday
"The pundits on the airwaves and the print media are attributing the market's 379 points to the Citi revelation alleging they were profitable during the last quarter. Whether or not the 379 was caused by Citi is open to speculation. What's not is the validity of Citi's purported black ink. ...
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Hidden Pivot Webinar & Tutorials
The next Hidden Pivot Webinar will be held on Feb. 29th - Mar. 1st. This two-day event is designed to teach you the risk-averse trading strategies Rick has taken to his seminars around the world. Once you have learned his proprietary secrets, you will approach trading and investing with enough confidence to make your own decisions without having to rely on the advice of others. For more information, or to register, click here.
Stocks Up, Gold Down: Insanity Rules!
by Rick Ackerman on March 11, 2009 1:02 am GMT · 3 comments
Yesterday, it was buy stocks, sell gold till your head caves in. What a bizarre inversion of reality – a gusher of pent-up stupidity! Next thing you know, there will be a huge stampede out of U.S. Treasurys. That would sound the “All clear!” right around the time nuclear-tipped inbounds start showing up on the Fed’s Erector-set radar. The exuberance that greeted yesterday’s 379-point surge in the Dow recalls the frolicking of Munchkins after Dorothy’s house dropped on the Wicked Witch of the East. As you may recall, they celebrated for all of about ten minutes before the even Wickeder Witch of the West showed up.
We give this short squeeze another day or two, ending just as CNBC’s benighted minions start piling into such oversold value plays as GM at $2 a share, Fannie Mae at 50 cents, and Goldman Sachs at $90. Investors will be loaded for bear at that point, only to find the forest inhabited by nothing larger than squirrels, skunks and rabbits. Incidentally, the rally was not difficult to foresee, as indeed we did with this tout sent out to subscribers Monday night: “Monday’s chat room buzz had it that a strong rally could erupt at any moment. Perhaps, but there’s no use cluttering our minds with such ugly speculation unless the futures pop through the three peaks show in the chart without drawing a breath.” As it happened, the futures popped through those three peaks, allowing us to capture a fair piece of the rally with some timely trading guidance in the chat room 30 minutes into the session.
Comex Gold Target
Nor had the weakness in Gold been unanticipated. We’d forecast a $35 drop in Comex April Gold, to around $881-$885, and the futures got about 60% of the way there with Tuesday’s selloff. That’s about as bad as we can see for now, although we’d need to take another look if the selling takes the futures below 875.70 by week’s end. At $881, though, Gold will have fallen 12.5 percent from its recent high near $1007. That’s the kind of selling we should like to see: nervous nellies dumping gold into strong hands. One day soon, when the latter make their move, you can bet they’ll thank the sellers with a vengeance.