Thursday, August 6, 2009

The Dollar Index seems reluctant to fall the last few inches to a _____ target given here earlier. If, instead, DXY were to surge above _____ first, that would be the likely start of a major bear rally. More immediately, it would take a pop above ____ today to put bulls back in charge of the minor trend.

Because our immediate outlook for silver turned very bullish recently, we took steps yesterday to protect profits in a key precious-metals stock that we hold, Silver Wheaton (SLW).  It was four months ago, in early April, that we advised subscribers to stake out a small position, buying four September 10 calls for 0.69 with the stock trading around $8. Silver Wheaton subsequently moved sharply higher and is currently trading for around $10.24. The call options rose in value commensurately and were quoted yesterday at 0.90, but the theoretical gain from the position is nearly six times the implied 21 cents. That's because, as SLW moved higher, we sold options short against those we held, effectively turning the position into a calendar spread: long four September 10 calls vs. short four June 10 calls.  Even better, because SLW took a sudden leap higher when we were offering June 10 calls short, we managed to sell them for 0.80 on the spike --11 cents more than we'd paid for the Septembers. Come hell or high water, this locked in a theoretical gain of $44 (i.e., 4x 0.11) on the spread. Ever since, we've adjusted the position, employing what you might call a "shampoo" regimen: rinse and repeat. And so we did, rolling into the September-July calendar spread when the Junes expired; and then rolling once again into the September-August calendar spread when the July calls expired.  In both instances, the underlying stock was trading for about $10 when we did the roll, allowing us to extract maximum value from the short sale of the option next to expire.  The net result is that we now hold the four calendar spread effectively for a net CREDIT of 0.90.  If you add the current value of the spread (0.30) to that sum, the $1.20 credit

A Hidden Pivot at 3.1354 that comes from the weekly chart is as high as I can project for now. It is a Hidden Pivot, and it's shortable.

The E-Mini S&Ps have been struggling too hard to cover the last few inches to a rally target flagged here a few days ago, so perhaps stocks need to rest for the remainder of the week before they renew their until-now tireless assault on shorts.

Expect the next  thrust to take the futures up to a tradable top at 1.4192, a Hidden Pivot that references 1.3416 (May 17) as an 'A' low on the hourly chart.

Apple is stealing up on a 170.55 rally target that could show some stopping power. Long-term longs should pay heed, and traders can short there with a stop-loss as tight as 15 cents.

Yesterday's gratuitous ups and downs left the Dow a little less than 200 points shy of the 9476 target we've been held in mind. More immediately, there's a lesser resistance at ____ that we can use to gauge the strength of any uptrend that develops today, and another at ____ if the first number is breached by more than 3-4 points. Alternatively, the Indoos would need to drop below _____ today to turn the hourly chart bullish.

My minimum downside target over the near term is 115^14.5, but the usefulness of this Hidden Pivot for bottom-fishing has been compromised by its close prximity to an intraday low made a week ago. Alternativly, a 116^19 print overnight or in the early going Thursday would turn the lesser charts quite bullish.

There's a midpoint support at _____ that night owls can use to bottom-fish, but I'd risk no more than three ticks on this, bidding ____, stop _____.  If the stop is hit, that would be telegraphing more weakness down to as low as _____ over the very near-term.  Although the 1008.25 rally target is still valid in theory, its potential usefulness has been invalidated by tedium.