There is still a rally target outstanding at 8343, and it is that fact more than any other right now that suggests stocks will go at least somewhat higher before the six-week-old bear rally peters (or perhaps flames) out. Assuming the Indoos take a little rest before their next sucker’s leap, we should look for the pullback to come down to at least 8047, a midpoint pivot asssociated with the target. As always, an easy breach of that support would suggest that more selling awaits.
From the monthly archives:
April 2009
An aging downside target at 845.20 looks as compelling as ever, but for today at least, it wouldn’t much to turn the hourly chart bullish. Specifically, a pop to 881.50 would do the trick. That would surpass more than the required two prior peaks needed to create an impulse leg, but in this case raising the bar by an additional two peaks is needed to bring us more confidently to the bullish case, since the first two peaks look a like namby-pambys. I have included a chart that shows what is needed.
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With our Dow target at 8343 in mind, I recommended buying the September 84-May 84 call spread yesterday via a mid-morning post under Intraday Notes. Specifically, I suggested paying no more than 3.45 for the spread four times. Since a subscriber reported in the chat room that he had executed the order at that price, I will track the position for your further guidance. I will also try to maneuver latecomers toward a belated entry, perhaps at an even better price, so stay tuned to Intraday Notes during the day if you’re interested. The purpose of this trade is to alleviate any anxieties from the small short positions we have taken in Microsoft and Google, and to make a few bucks while we wait for this horrid short squeeze to end.
I still don’t see a ghost of a chance that the futures will not hit 871.25, at least, but if they exceed that Hidden Pivot by more than three ticks, brace yourself for more short-squeeze to a minimum 890.50. The first target was originally offered as a good place to try shorting with a very tight stop loss, but the number has been pretty well advertised by now, and some front-running is therefore likely to occur, perhaps catalyzed by your fellow subscribers. Also, the pivot is less than ideal for trading purposes because it coincides with some very important highs made in early February. If settlement today is above those highs, which lie respectively at 869.75 and 871.00, it would hint that bears will remain under pressure next week.
Much as I try to present the bright side each morning in my Gold tout, there is nothing to suggest that an old target at 845.20 will not be reached; moreover, if it should be exceeded by more than $1 or so, it would portend further slippage to at least 831.30. Both of these Hidden Pivot targets could be bottom-fished with a very tight stop-loss. There is one more hidden support at 866.70 that could come into play, although its close proximity to a key low at 865.00 recorded on April 6 would make bottom-fishing there someone riskier than if the pivot were situated, so to speak, in the middle of nowhere. Alternatively, to effect a bullish reversal on the hourly chart, the futures would need to print above 911.80 today or Monday.
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The option position could have been closed out yesterday for a gain ranging from $800 to $1,200, with the best opportunity coming on Goldman’s dip to 118.65 about 90 minutes into the session. If you still hold the two July-April 115 and 120 calendar spreads (along with a single extra short April 115 call), you should exit it today rather than carry an unhedged position in the July calls into next week. Playing it down to the wire today would be risky, but not without commensurate rewards. Maximum theoretical gains of about $2280 on the entire position would come with the stock settling at $115. The April calls would be theoretically worthless, the July 115 calls would be selling for around 17.30, and the July 120s for 14.70. That profit estimate also reflects a $400 loss on some April 130-135 call spreads and April 90-85 put spreads that we still hold. I’ve included a snapshot of an option calculator that shows how I calculated maximum spread values at expiration. Effectively, with the stock at 115, it values the April calls we are short at zero, leaving the price of the July calls we are long as the spread value.
Suddenly, a Town Is on the Ropes
by Rick Ackerman on April 20, 2009 12:01 am GMT · 5 comments
Here’s the headline from Saturday morning’s Boulder Camera that pushed Colorado’s big snowstorm off the front page: City Mulls Millions in Cuts. Uh-oh. Could it have been just a few short weeks ago that we were reading about how Boulder’s budget was well under control? The story then was that the city was going to have to watch expenditures more closely than usual because of the severity of the economic downturn. Now, though, they’re talking about shutting down the recreation centers, fire stations, libraries and who knows what else. There’s also the dreaded possibility of “special tax districts” that would raise money to support services and amenities that most taxpayers must have thought they » Read the full article