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COMMENTARY for Friday
TODAY'S ACTION for Friday
Rick's Picks for Friday
In after-hours trading, the futures appeared to be struggling to reach the 1062.75 midpoint of a minor corrective pattern projecting as low as 1056.50. Either of these Hidden Pivots can be bottom-fished with a stop-loss as tight as 1.00 point, but if the trend reverses Thursday night or Friday morning, hitting 1070.00 before 1063.75, bears had better get out of the way. My immediate target thereupon would be 1073.00, but with a good shot at 1085.00 if it’s exceeded by more than 1.00 point. [Note: The interpolated over/under numbers for the December contract are, respectively, 1065.25 and 1059.00.] ______ UPDATE (10:14 a.m.): The futures have rallied from an overnight low the fell in-between the two levels of corrections targets given above. The move was impulsive, so that the pullback now in progress must be viewed as such rather than as the start of a significant downtrend. It would take a 1047.50 print to reverse bulls on the hourly chart.
The futures look pretty neutral right now. Notice in the chart how yesterday’s downtrend played out to within a single tick of a crystal-clear target on the 3-minute chart. Now, if the recovery rally hits or exceeds its target, bulls would be back in charge. _______ UPDATE (10:22 a.m.): Gold’s rally stalled a single tick above the 1019.40 target shown in the chart, and although I had said this would put bulls back in charge, I jumped the gun. In fact, Gold needed to have exceeded the Hidden Pivot — exceeded it by more than a single tick, anyway — to suggest there’s enough buying enthusiasm to take the futures to a new threshold.
Apple’s “story” has dimmed slightly with the recent announcement of dramatic price cuts for the firm’s high-capacity iPods. The news would probably be easily absorbed if the stock were trading at half its current price, but the rally in fact has looked like it needed a rest for the last 50 points. Accordingly, we’ll use a Hidden Pivot target not far above, at 193.87, to try and get short. We’ll have a better idea of whether the stock will actually reach that number once we’ve seen how far it pulls back from yesterday’s high. Anything exceeding 182.82 would indicate possible trouble. _______ UPDATE: 188.90 is as high as buyers could muster on the last rally peak. The target is still valid in theory, but we’ll put this trade aside for now, since it can only distract.
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Based on a 155.30 rally target disseminated here on May 6, we bought four June 152 puts yesterday for 1.00 with DIA topping at 155.14. Since I advised closing out two of them for 1.14 intraday, we are left with a profit-adjusted position of two puts whose cost basis has been reduced to 0.86. Now, offer an additional put on the opening and hold the remaining put as a lottery ticket. ______ UPDATE (12:25 p.m. EDT): The puts opened for 2.30, so the sale of one more would leave you with a single put whose costs basis, adjusted for gain so far, is a 1.44 CREDIT. Thus, a profit of $144 is the worst this trade can do no matter what happens to DIA. For now, do nothing futher.
The climax of yesterday’s bullish stampede exceeded an in-our-wildest-dreams target by 56 cents (see inset), but when the dust had settled, short positions initiated by subscribers near an 89.43 Hidden Pivot were well in-the-black. For tracking purposes I’ll use 24 May 87.50 weekly puts that two subscribers reported buying for 0.11 in the chat room. They had tripled in price by the close, and so half should have been exited at some point along the way. However, since I made no explicit suggestion that you do so, I’ll assume none were sold and recommend that you close out half at-the-market on the opening. Of the 12 that would remain, offer six for 0.50 and hold the rest for a potential home run on Friday, when the puts are due to expire. The 0.50 offer to close should be entered before Thursday’s opening, since traders could conceivably exit a total of 18 puts at that price or higher on a gap-down at the bell. ________ UPDATE (12:18 p.m. EDT): The puts opened at 0.50, so you would have reaped $900 on the sale of 18. Since their total cost was $264, there is a theoretical profit of $636 so far. You can sell the rest at will either today or tomorrow. Their cost basis is now zero, so whatever you receive for them would be added as profit to the $636.
Yesterday’s trade in this vehicle had not been offered as a tout, but a timely question in the chat room helped us identify an opportunity to pick up some cheap call options intraday. Here is what I wrote in the chat room: “The Auggie 160 market is 0.22/0/26, so 0.24 is the right price with GLD at 132.88. So, if GLD falls to our 131.83 target, the Auggie 160s should sell for about a nickel less (they have a delta value of about 0.04). So let’s bid 0.21 (an extra penny for good measure) for 28 of them., stop 0.18. We’ll worry about what to spread against them later.” Although the intraday low at 130.95 exceeded our target, the result was that subscribers were able to buy August 160 calls for 0.21, a penny off the intraday low.
This position is highly speculative, since there are two very bearish targets outstanding, but it has the potential to pay off at about 60-to-1. With a three-cent stop-loss on the calls, we’ve limited our theoretical risk to about $84. However, I’m now going to suggest giving the position a little more room by lowering the stop to 0.16. At the same time, and on a one-order-cancels-the-other (OCO) basis, I’ll suggest offering 28 August 163 calls short for 0.30 against those we hold. If the order fills we’ll own a virtually riskless position that can make us as much as $8400 if Gold rallies strongly between now and late August.
Wall Street did not exactly take Apple out to the woodshed following yesterday’s revelation that the firm has paid little or no taxes on foreign income of $75 billion. The stock flinched, down $2.73 on the day, but investors seem to recognize that revising 275,000 pages of tax code to force Apple to pay its fair share will require many years of wrangling on Capitol Hill. And who’s to say that the effort would not leave other loopholes just as easily exploited by the Sunnyvale behemoth’s clever lawyers and accountants?
Technically speaking, however, the news seems to have sapped some of Apple’s vital juices, since the stock failed for the second consecutive day to decisively exceed a small but nevertheless significant ‘external’ peak at 445.36 (see inset). That feat, trivial though it may seem, will remain crucial to the short-term picture. If and when it is achieved, expect the stock to rise to a minimum 449.9o, a Hidden Pivot target. If the pivot is easily surpassed, look for the bullish momentum to continue till week’s end, at least. Camo traders should position from the long side, using the 15-minute chart for leverage.
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Yesterday’s rebound in this vehicle was strong, although not quite as compelling as the one in Comex Gold futures. Moreover, the intraday low exceeded the midpoint support of the pattern shown by a decisive 52 cents, shortening the odds that its ‘D’ sibling at 22.25 will eventually be reached. We’ll give bulls the benefit of the doubt nonetheless, since mining shares are unlikely to languish if they catch their first whiff of strength in bullion in many months. From a Hidden Pivot perspective, this vehicle needs to keep running without taking a breath until 29.83 (a 5/14 peak) has been exceeded. Camouflageurs should look for entry opportunities on the 15-minute chart, since there are some choice ‘externals’ to be found therein. ______ UPDATE (May 23, 12:33 a.m. EDT): The breath that GDX could not afford to take has in fact been taken, casting at least mild doubt on a bullish outcome. Worse than drawing a breath, actually, GDX sucker-punched bulls on the opening bar.
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Tesla got short-squeezed to within 28 cents of the 86.72 target I’d proffered early Monday morning, but a second-wind rally to 88.00 suggests it’s got eyes for 104.44, the ‘D’ target associated with the first number. It can serve as a minimum upside objective for now, implying that all trades between here and there be positioned from the long side. We’ll plan on buying weekly puts if and when the target is reached, provided it happens before Wednesday of the given week. Please note as well that a lesser Hidden Pivot at 94.19 (see inset) has the potential to stop the rally cold and can therefore be used for spec camouflage shorts.
All signs point higher at the moment, but even Google will have to top somewhere. My best-bet for a short-able apex is 929.78, the Hidden Pivot target of a well-defined ABCD on the monthly chart (see inset). You can try shorting with camouflage at that number, or at the D target (in purple) of the lesser pattern, but until then all trades should incorporate a bullish bias. ______ UPDATE (May 23, 12:40 a.m. EDT): Yesterday’s selloff did not create an impulse leg on the hourly chart, but it is not exactly a sign of good health that the decline has begun without GOOG’s having quite achieved our 929.78 target. A further drop today exceeding 883.96 to the downside would add to the evidence that the recent top will be an important one.
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SIDE BETS for Friday
A heads-up: TBT is approaching a bearish Hidden Pivot target at 43.39 that would offer a back-up-the-truck buying opportunity if it is reached. This would of course imply that the price of the underlying long bond is approaching an important top.
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Which Recovery Story Are We to Believe?
by Rick Ackerman on September 18, 2009 2:05 am GMT · 3 comments
Is the economy recovering? Nowhere is there more confusion on this topic than in the pages of the Wall Street Journal. Anyone scanning just the headlines might think we’re on the cusp of a solid rebound: retail sales are up, home sales are starting to move, and the Fed chairman thinks the worst is behind us. It is only when one burrows into the newspaper, particularly the op-ed pages, that a more sobering picture emerges. The facts well behind » Read the full article