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COMMENTARY for Tuesday
TODAY'S ACTION for Tuesday
Rick's Picks for Tuesday
Bears shouldn’t get their hopes too high over this, but it is a fact that yesterday’s short-squeeze failed to clear a series of peaks along the “wall” of last week’s decline. This hints that the buying was too gutless to take on any more than the low hurdles posed by a couple of modest highs made on Thursday and Friday. A bullying rally is what it was, and although we won’t hazard a prediction as to where it will end, our hunch is that it will end badly. Meanwhile, on the hourly chart a case could be made for a follow-through to as high as 942.25 (A=862.25, May 1). It is also worth noting that yesterday’s high, 908.75, coincided to-the-tick with that target’s sibling midpoint.
Fear that Goldman’s psychotic spree could hit $160 seems to have pervaded the chat room on Monday, so perhaps the stock is actually close to a top. Or maybe not. From a Hidden Pivot perspective, 171.87 is undeniably possible, although it would require yet more of the sort of elongated ABCD pattern that keeps shorts in the game by failing to blow them out in a ghastly day or two. That’s what has been going on so far, and if that ghastly day finally arrives, it could take the form of a final spike amounting to perhaps $20 or $30. Even using a less ambitious projection from the April 21 low yields a minimum 156.24, so this is probably not the stock to short if you want to take a conscientious stand against all of the stupidity. Parabolic blowoff or not, we’ll continue to monitor minor retracement patterns for signs of a turn, since that’s where one would show up first.
An hour-long bounce yesterday from a Hidden Pivot at 918.10 that I flagged in the chat room ended ignominiously with a relapse to 915.20. This implies the futures will now fall to at least 911.50, a Hidden Pivot that you can bottom-fish with a stop-loss as tight as 910.90 Please note that a print exceeding 924.80 would negate this target while turning the minor trend not-very-persuasively bullish. The bigger picture remains bullish and was unscathed by yesterday’s price action, such as it was. One might surmise that precious metals were fatigued from watching the world’s bourses celebrate the regime of paper money by making Goldman Sachs shares the star of their blanket-toss.
No, you’re not imagining it: Google has conspicuously lagged the financial stocks in the current mania and is even starting to look a bit heavy on the daily chart. We hold a very modest short position in the form of a single September 270 put, so we should be cheered by the fact that the stock is trading less than 2 percent above where it was when we bought the put back in mid-April for $8.
Okay, let’s see FAZ try to hurt us, now that we’ve acquired four October 10 calls (FAYJB) for 1.20. These pups will require little tending in the weeks ahead, but I may call on you at some point to acquire some call options in another vehicle, the better to effect a strangle-type hedge. Thereafter, with a few bucks down on the pass line, we’ll be better able to summon the proper enthusiasm when rallies happen, as they always will. This was a strategy I employed on the options floor in the late 1980s, when I was absolutely certain the bank stocks were about to collapse. They didn’t — far from it, actually — and I lost a small fortune on the thousands of put options I held. But I made it all back and much more by being very long drug stocks, including Schering Plough in its heyday. Remember: We want to come out ahead no matter what happens, and we want to have fun while we’re doing it.
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Take the Odds Against Banks
by Rick Ackerman on May 19, 2009 1:48 am GMT · 3 comments
The bear rally that wouldn’t die frolicked once again yesterday, leaving shorts badly bloodied and hanging from the ropes. The Dow Industrials, for one, opened sharply higher on a 100-point gap, then just kept going with only tepid pullbacks along the way. The buying spree had been telegraphed the night before when the E-mini index futures appeared to struggle to reach a minor pullback target off Friday’s highs. Because of this, » Read the full article