June 2009

Sometimes common sense comes from the most unexpected places. Consider this bearish take on the stock market from - better sit down for this - a Morgan Stanley strategist, Jason Todd: "Equity markets now implicitly need a V-shaped recovery to sustain further gains," he told a reporter for the Wall Street Journal yesterday. "We do not expect such a recovery and therefore believe the next move is more likely to be down than up." What's next? A warning from Abby Cohen, perhaps, to lighten up on stocks?  Actually, it looks like traders aren't waiting for the preternaturally bullish Abby to sound the alarm, since they pummeled the Dow Industrials for a nearly 300-point loss in the last two days. That's not much compared to the heady days of last autumn, when we saw the blue chip average fall more than twice that in mere hours. But it does represent a minor triumph of head over heart at a time when green shoots of recovery have been spotted growing out of every crack in the asphalt from New York to Michigan to California.     We haven't seen any shoots ourselves other than a few weeds, although we did advise some cautious bottom-fishing in the shares of Apple yesterday if the stock dips just a bit lower. We also hold a small long position in Akamai, a "cloud computing" favorite that has been in a holding pattern since, seemingly, the dawn of history. These two stocks seem like pretty conservative plays to us, since both companies have been doing relatively brisk business even with the global economy in a deep funk. But it never hurts to have some insurance, and that's why we were bearishly bidding yesterday for some put options on the Diamonds, a trading vehicle that mirrors the action in the

The 9008 target is growing a bit stale, even if it remains viable in theory. Here's a target that is equally valid and which is proffered to stretch the bearish imagination:  _____. It is the Hidden Pivot midoint of the pattern shown in the chart, and the implied ____-point drop doesn't seem like much of a stretch in the context of the larger, bearish patterns at work.

I'm not keen on chasing the puts, so let's move to the sidelines and wait for the minor downtrend play out.  If the Diamonds are going to provide us with another opportunity to get short on an upswing, they should put in a tradable bounce from either ____ or _____, or both. While we're waiting, you can bottom-fish the second number with a stop-loss as tight as 8 cents.   _______ UPDATE: Cancel the bid, since DIA has remained stubbornly buoyant

The futures will need to punch through a midpoint resistance at 938.00 to convert yesterday's impulsive rally into something we can root for. A Hidden Pivot at ____ would become the minimum upside objective at that point, and just a dime more (i.e., 945.10) would renew the bull trend on the hourly chart for yet another surge.

Powerful as yesterday thrust may have seemed, it fell a tad shy of impulse-leg glory on the hourly chart.  The September contract would need to beat 1.0366 to accomplish that -- 14 ticks  above yesterday's high. Traders please note:  a pullback from just 2-3 ticks above 1.0366 would be buy-able.

Any Hidden Pivots we might find would be superseded by visually obvious support near 36.60 that was created by a series of lows in mid-May.

The Dollar Index looked like it was on its way up to at least 81.76 yesterday when it got timed out.  Any higher today would suggest that this rally has legs.

I've used a Fibonacci-based target in the E-Mini S&P this morning, since there were no compelling Hidden Pivot supports to be found, even on the lesser charts. Keep in mind that we have a bid in below the market in AAPL, as well as another -- for a couple of out-of-the-money puts -- in the Diamonds.

We'll stick our necks out an inch today, bidding 1.90 for two ____ puts.  We'd be looking to buy more of them if the futures were about to top at a Hidden Pivot resistance, but in this case they have already started lower, negating any edge we might hope to gain by shorting as Hidden Pivot swing point.