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Bank Scare a Ruse to Shake the Tree

by Rick Ackerman on September 2, 2009 12:22 am GMT · 6 comments

A run on a major U.S. bank?  Who could have been spreading such scurrilous rumors? They surfaced yesterday in the Rick’s Picks chat room, and elsewhere, not long after we’d done some personal banking ourselves in an online account at the very same bank. We experienced no delays or problems with the transaction, notwithstanding reports of a “default situation” and “elevated” buying of put options on the shares of the bank.  We were able to confirm that there had indeed been a flurry of put-buying, but the action was not so frenetic as to suggest that the bank was in any serious trouble. 

bankers

To the contrary, banks are operating under such loosey-goosey rules right now that they shouldn’t have a care in the world. Imagine having a notarized letter from your local police chief authorizing you to loot and plunder any store in the neighborhood without fear of arrest. That’s how the banks are doing business these days – which is to say, however they want.  And if a deal should turn sour it’s no problem, since the U.S. government has assured banks that it will pay 100 cents on the dollar for any securities that ultimately fail to clear the market.

Smoldering Ruins

Tuesday’s rumors of a big bank on the ropes evidently were prompted by general weakness in banking shares. The selling had been attributed to nervousness over the prospect of more losses to come in the banking sector. A few analysts added to the stresses of the day by speaking cautiously about bank shares.  Has the spectacular rally begun last November finally run out of steam, they asked? We seriously doubt it. More likely is that those who have been accumulating bank shares hand-over-fist simply backed off their bids for a day, allowing the stocks to fall to more appealing levels.

Bloomberg, CNBC, the Wall Street Journal and all the rest bought into this ruse with a deluge of commentary concerning how financial stocks supposedly have gotten too far ahead of “fundamentals”. Fundamentals!?  If the day ever comes when fundamental analysis is applied rigorously to securities markets, the financial system will be reduced to a smoldering ruin in mere days. For the time being, though, the bankers are enjoying a holiday from scrutiny that makes all things possible. Under the circumstances, with Tammany Hall sensibilities determining the course of the financial system, we should not be looking for a top in banking shares, only an occasional pause in their upward spiral.

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TODAY'S ACTION for Wednesday

Against the Grain…

by Rick Ackerman on September 2, 2009 1:18 am GMT

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Rick's Picks for Wednesday
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All Picks By Issue:

GCZ09 – Comex December Gold (Last:955.00)

by Rick Ackerman on September 2, 2009 12:44 am GMT

The futures spent the day struggling to go lower, failing in the end to overpower a midpoint support at 947.60 whose breach would have greased the skids down to 938.70. The bearish pattern is shown in the accompanying chart, and as you can see, the pre-dawn bounce came from a low that lay within a single tick of the pattern’s calculated midpoint. The reactive rally was no world-beater, to be sure, but on balance the picture is at least mildly bullish for the near term.  A 978.00 rally target given here earlier remains viable, but like you I am growing a bit impatient about it.

GS – Goldman Sachs (Last:162.03)

by Rick Ackerman on September 2, 2009 12:53 am GMT

Yesterday’s savaging did no damage whatsoever to the bullishness of the daily chart, although there is still room to fall on the lesser intraday charts. Specifically, a Hidden Pivot target at 158.90 looks like a good place to try bottom-fishing. Officially we’ll bid 158.93 for 200 shares, stop 158.79.  We continue to hold the Jan 130 – Oct 130 put spread four times for 3.40 and a September 170 call for 2.00. _______ UPDATE: The bottom-fishing gambit worked out nicely, since the stock rallied $1.08 after making a low at 158.90 around midway into the session. You would have needed to apply a trailing stop, though, since Goldman subsequently relapsed to 158.14 before the closing bell.

SIU09 – Comex December Silver (Last:14.970)

by Rick Ackerman on September 2, 2009 1:01 am GMT

Silver effected a promising spike yesterday afternoon, but the futures were struggling to hold onto the gain early in the evening.  If they go no lower than 14.940 overnight, however, any rally exceeding the relevant midpoint resistance at 15.155 would suggest additional upside potential over the near term to as high as 15.365.

DXY – NYBOT Dollar Index (Last:78.80)

by Rick Ackerman on September 2, 2009 1:12 am GMT

The rally looked altogether unimpressive until late in the session, when a fleeting spike surpassed a look-to-the-left peak at 78.91 that I’d flagged in the chat room. That gives the rally nominal appeal on the lesser charts, although we should require 79.79 today to validate it. The location of the obscure but important peak-let this would surpass is shown in the accompanying chart.

$SIZ14 – December Silver (Last:18.655)

by Rick Ackerman on September 16, 2014 1:25 am GMT

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$SLW – Silver Wheaton (Last:23.02)

by Rick Ackerman on September 15, 2014 6:06 am GMT

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$GCZ14 – December Gold (Last:1234.20)

by Rick Ackerman on September 15, 2014 5:50 am GMT

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$+ESU14 – Sep E-Mini S&P (Last:1975.25)

by Rick Ackerman on September 15, 2014 4:07 am GMT

We’ll soon see whether bears have the guts, composure and good sense to let their profit run, since the futures have gotten within an inch of the 1972.00 correction target shown. As always, a decisive move through such a clear Hidden Pivot support would imply there is selling power remaining to be spent. In this case, however, the Sunday night Sleazeballs have opened the E-Minis with a 13-point air pocket that suggests they’re worried. That’s a pretty brazen heist, but it also reflect the reality that every point of it was needed to completely exhaust sellers ahead of an equally brazen run-up. The logical place to short this manipulation is near the 1984.75 midpoint pivot (p) shown. Night owls should use camouflage or a mechanical stop to accomplish this. The latter implies 5.00 points of entry risk, predicated on 15 points of downside potential.  For the record, I remain short this vehicle in my BlueFin account from near the all-time high, having stood pat during Thursday’s nasty short squeeze. _______ UPDATE (11:24 p.m. EDT): The corresponding target, basis the December contract, is 1962.50.  It will leave DaBoyz with a little more room if they need to take ‘er down a second time to dry up sellers ahead of another short squeeze.  The short noted above would therefore be from p=1977.00 _______ UPDATE (10:28 a.m.): If you shorted 1977.00 as I suggested, the trade would have produced a profit of as much as $375 per contract, since the futures dove 7.50 points from an opening-bar high this morning at 1978.00.  They are ratcheting higher at the moment, bears quite evidently lacking in guts, composure and good sense, but we at least came away with the best trade of the day so far.

$DJIA – Dow Industrial Average (Last:17025)

by Rick Ackerman on September 12, 2014 12:01 am GMT

When a stock or an index takes a wicked dive, it often occurs after the particular vehicle has marginally exceeded some prior, significant peak. ‘Everyone’ turns bullish on the breakout, including bears prepared to cover on a hair-trigger signal, and that sets up the haymaker. Notice in the accompanying chart, however, that the record high recorded by the Dow on September 4 has led to no such plunge.  The high exceeded July’s record peak by 10 points, and that should have been enough to get bulls’ — and bears’ — juices flowing.  Instead, we’ve seen only a moderate pullback since then, leaving bears very much on the hook.  We could still see a collapse from these levels, particularly if there is unsettling news. But for the time being, bears shouldn’t get their hopes too high. We are short the Diamonds via some out-of-the-money put options just in case, but we may have to reshort if DIA breaks out to new highs. (Note: This tout is being written before Thursday’s close, since I will be away from the office later today.)

$TLT – Lehman Bond ETF (Last:113.38)

by Rick Ackerman on September 11, 2014 1:29 am GMT

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$INX – S&P 500 (CME) (Last:1985.54)

by Rick Ackerman on September 9, 2014 1:19 am GMT

An alert chat-room denizen spotted the target shown, and it’s a jim-dandy.  Pivoteers will notice that the point ‘A’ low seems to be positioned in the middle of nowhere.  In fact, it is at 244, the low of the 1987 Crash. The remaining two coordinates are so clear as to leave little doubt about the importance of the resulting 2028.44 Hidden Pivot target. So far, the S&Ps have gotten as high as 2011.17 — close enough for us to infer that a MAJOR top may already be in.  If so, we are covered via DIA puts that I suggested buying and which are still attractive (see tout for details). As I noted in the chat room, it is inconceivable to me that the stock market will NOT make a top of at least tradable importance very near the target, so you should position accordingly. ______ UPDATE (Sep 9, 7:56 p.m.): There are more exchange vehicles tracking the S&P 500 that one can count, but depending on which you use, the Hidden Pivot target given above could be as low as 2018.04.  If so, that would mean that the so-far high at 2011.77 came even closer to fulfilling a price objective that had been  27 years in coming. Our trading bias should therefore be bearish, with wider-than-usual-stops for any short positions taken. See today’s E-Mini S&P tout if  you want a precise way to gauge the bear’s strength at any point in time. _______ UPDATE (September 15, 12:43 a.m. EDT): So far, so good — even if progress to the downside has been labored. The INX appears bound for the 1982.23 target of (on the hourly chart) A=2007.51 (9/5): B=1982.99 (9/10); C=1997.65 (9/11).  The current correction up to (and slightly past) the 1985.29 midpoint pivot is therefore short-able if via camouflage.

$+DIA – Dow Industrials ETF (Last:171.27)

by Rick Ackerman on September 5, 2014 3:58 am GMT

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$SNIPF – Snipp Interactive (Last:0.2562)

by Rick Ackerman on September 5, 2014 3:05 am GMT

I first touted Snipp Interactive back in January, when it was trading around 0.15. Although the stock subsequently fell to a dime, it has since rallied sharply, settling at 0.2562 yesterday. This is one of my favorite stocks, and I came away from a conference call with its CEO, Atul Sabharwal, eager to sing their praises. During that call, I hit Atul with my best idea, a sweepstakes-type promotion, but he was already three steps ahead of me, able to cite, for one, New York State’s rules and costs for exactly the type of marketing scheme I’d suggested.

Full disclosure: I hold 100,000 shares plus warrants to purchase another 50,000 shares.  But I hope that won’t discourage you from performing your own due diligence, since you are likely to be as impressed as I was when you find out what the company has been up to. For me, at least, Snipp (OTC: SNIPF) perfectly satisfies Peter Lynch’s rule that investors favor companies whose strengths and methods they can understand. Snipp does interactive marketing that allows clients to track results in real time. The results have been sufficiently impressive that the company has been attracting blue chip clients with little difficulty. Read more about SNIPP by clicking here.

From a technical standpoint, although the stock’s chart history is thin, it’s possible to project a near-term rally target of 0.2730. A tenet of Hidden Pivot analysis is that an easy move through such targeted resistance implies there is unspent buying power percolating beneath the surface. This is not a “hot tip;” indeed, Snipp’s story does not lend itself to the kind of hubris that will result in a $10 billion IPO. But it is an aggressive and imaginative pioneer in a rapidly developing niche, and its CEO has the kind of imagination, intelligence and energy that inspires confidence.

$+TSLA – Tesla Motors (Last:279.20)

by Rick Ackerman on September 3, 2014 5:30 am GMT

Tesla’s strong rally has turned the Oct 3/Sep 5 calendar spread into a solid winner. The spread is currently trading on a bid/asked of 4.50/5.07.  This means subscribers who bought the spread for as little as $1.00 last week could have quintupled their stake. The most paid for it would have been about 1.54. In any case, I’ll suggest offering half of the eight spreads to close today for 4.70. We’ll plan on rolling what’s left on Friday by covering (buying) back the September 5 300 calls we’re short and shorting the Sep 12 300 calls at the same time. ______ UPDATE (10:40 p.m. EDT): The stock’s push to an intraday high at 291.42 made the spread an easy sale for $5.00+, so I’ll consider the order filled.  Now, roll the four spreads that remain into the October 3 /September 12 calendar as detailed above. _______ UPDATE (Sep 7, 10:31 p.m.): The midway price on the spread intraday was 2.30. Imputing the premium to the four October 3/September 12 calendar spreads we now hold would zero out the initial cost of 1.54 and add 0.76 to the real-time value of the spread.  We’ll plan on rolling the spread again on Friday by selling the September 19/September 12 call spread (and thereby covering the short Sep 12 300s), but for now do nothing further. _______ UPDATE (Sep 15, 12:54 a.m.): I’ll use a 0.37 price, midway between the intraday high and low, as the spread price unless I hear from someone in the chat room who did better or worse. Imputing this new premium income to our Nov 22 / Sep 20 spread gives us a CREDIT cost basis of 1.13, for a guaranteed minimum profit on the position of $452. That would be in addition to whatever the Nov 22 calls fetch when we exit them.

+GDXJ – Junior Gold Miner ETF (Last:37.51)

by Rick Ackerman on September 2, 2014 12:03 am GMT

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SIDE BETS for Wednesday

ESU09 – September E-Mini S&P (Last: 996.00)

by Rick Ackerman on September 2, 2009 12:57 am GMT

Below 999.75, there were no more Hidden Pivot targets to project yesterday using the hourly chart. That is still the case, although we can use the breach of a look-to-the-left peak at 1009.50 to signal us when ES is turning around.


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