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Neither bulls nor bears seems particularly inspired at the moment, although the edge still goes to the latter and to the downside target given here previously: 970.80. A descent to that Hidden Pivot would become an odds-on bet if its midpoint sibling at 985.60 is exceeded on a closing basis. Alternatively, the futures would need to touch 1000.10 on a rally Monday night or Tuesday to turn the minor trend bullish. A more important midpoint resistance would come into play thereupon, and with its breach a potential run-up to 1028.10.
Trading the E-Mini S&Ps used to be as easy as shooting fish in a barrel, but no longer. In fact, the futures have gotten so cunning when they reverse direction that I’d all but given up on using camouflage tactics to corral them. It’s not that the turns haven’t been occurring precisely where they are supposed to — just that they haven’t been doing so with the kind of subtle abc patterns that yield easy ‘camouflage’ trading opportunities. My hunch is that this behavioral change is the result of machine trading’s growing dominance.
From our standpoint, the way around this problem turns out to have been so obvious that I failed to see it until recently. Very simply, we should go back to trading the E-Minis the old-fashioned way — i.e. without camouflage. This means putting up a bid against the minor trend, which can be scary. But we can mitigate the fear factor by being especially choosy about the kinds of patterns we trade. The one shown in the inset is a case in point. It is what I like to call ‘beautiful-ugly’, meaning that although it is not very abc-like visually — it’s pretty gnarly, actually — it meets our abc criteria perfectly, with a point ‘B’ low that has surpassed out two distinctive ‘external’ lows.
Those who were in the chat room yesterday got a taste of the near-certitude that such price patterns can inspire. With the futures trading around 1790.00, I stated that the E-Mini was bound for a tradable low at exactly 1785.75. (A Tradestation quirk caused me to err by two ticks, but several chat-roomers got the 1786.25 Hidden Pivot target precisely right.) An hour later, with the futures still noodling around a few points north of the target, I posted the following: “[The E-Mini] is taking its time getting there, but it doesn’t have any choice about it. The trade desks of the world are the unwitting lackeys of Hidden Pivots.”
So it would seem. A short while later, with about 100 minutes left in the session, the futures made their final descent to an intraday low at…1786.25. At least one person in the room reported nailing the trade and coming away with a quick profit of $200. This was the second day in a row that the futures bottomed exactly where we’d expected. A cheap parlor trick, for sure, but one that anyone can learn. To reserve your seat for the upcoming Hidden Pivot/Camouflage Trading Webinar on December 11-12, or to find out more about it, click here. The early-bird special is still valid for a $560 discount.
At the Mining & Minerals Conference that I attended last week in San Francisco, I found Altius still to be high on the list of many savvy investors. With $130 million cash in reserve and a royalty stream that nicely offsets fixed outlays of $5 million per year, the company is well positioned to ride out whatever further pain bullion’s bear market inflicts on investors. Altius is waist-deep in iron ore investments these days, causing some to remark that bullion is no longer much of a concern to the company. This is an exaggeration, but investors should be happy in any case that the firm is doing what it takes to survive gold’s fall from $1900 to a recent $1220.
From a technical standpoint, the stock has been in a holding pattern centered on a $9-$11 range for more than three years. The weekly chart shows ‘dueling impulse legs’, implying that the tedious battle between bulls and bears could continue for yet some time, perhaps with an exhaustion skew down to $8 or a little lower. At that price, especially considering Altius’ enviable cash position, the stock would represent a back-up-the-truck buying opportunity.
Notice that bulls’ best shot on Friday failed to punch past the implied resistance of the two labeled peaks, let alone the crucial ‘external’ peak at 1267.90. If any of this were to occur over the next several days, we’d be the first jump back on the bullish bandwagon, such as it is. Barring this, however, the bearish targets given here earlier will continue to obtain: 1212.80, 1195.40 and, ultimately, 1125.00. I am making no recommendation for a ‘camouflage’-style entry here simply because the lesser charts that we’d be using to do so are conflicted, reflecting a duel between bulls and bears. _______ UPDATE (8:08 p.m.): No change, although camouflageurs can always attempt to bottom-fish any bearish target that I’ve highlighted in brown. They are Hidden Pivots, which implies that they are high-odds spots for price reversals.
We hold twelve December 145 puts, offset in ’straddle’ fashion by bullish NFLX call spreads we own. To simplify accounting, and to consolidate the risk, I’ve imputed the cost of the puts to the NFLX position so that we now hold eight December 400-410 calls spreads with an effective cost basis of 0.55. Keep in mind, however, that the DIA puts still have value. As such, I’ll recommend that you offer them to close, good-till-canceled, for 0.02 less than the market makers. To do this, wait until the options have opened each day to see what bid/asked is being reflected by DaRapacious Dirtballs. At the moment, they are showing a bid of 0.06 and and offer of 0.12 (!). This means you should be offering the puts for 0.10. Please notify me in the chat room if your order fills, since it would be nice to have the puts off the sheets even though we are carrying them for zero.
Subscribers hold 16 December 400-410 call spreads with a cost basis of 0.40, predicated on a 411 rally target. With 25 days till expiration, a stall or swoon could be fatal to December premium. Accordingly, I’ll suggest taking a partial profit if the opportunity arises, closing out eight of the spreads for 0.80. Mark this offer good-till-canceled. Nearest Hidden Pivot resistance above: 359.57. If buyers shrug this one off, we’ll be in great shape come Monday. _______ UPDATE (11:17 a.m. EST): The Dec 400-410 call spread was 0.96 bid this morning and currently an easy sale for 0.80, so I’m going to record eight spreads covered for 0.80. This will allow us to hold the eight spreads that remains for 0.55. That number fully discounts the cost of twelve DIA December 145 puts that we’ve been holding, in ’straddle’ fashion, as an offset. Total risk remaining: $440. Incidentally, you should keep in mind that some horrific black swan event could turn the puts into winners. Check my DIA tout for corresponding advice, since the puts still have value. _______ UPDATE ((December 2, 1:20 a.m. EST): To neutralize our risk, offer four of the spreads to close for 1.10, good-till-canceled. This spread was do-able on Friday with a little work. I am also reducing the cost basis of our spreads to 0.40, since subscribers have reported closing out the twelve DIA puts for 0.10.
In the current forum discussion, Cam Fitzgerald focuses on coffee’s bear market to provide some lucid insights into the deflationary dynamic at work in the commodity markets. He notes that although the price of coffee beans has collapsed, falling by two-thirds since 2011, Starbucks is still charging the same four bucks for a large latte. This profit-friendly anomaly has held true for many other companies that benefit from a widening spread between commodity prices and end products. It would seem to flout the laws of supply and demand, but Cam says the textbook relationship will reassert itself with a vengeance as consumers become increasingly frugal under the weight of a deepening Great Recession.
From a technical standpoint, his theory looks quite solid. The weekly chart (see inset) implies that a pound of coffee currently trading on NYMEX for $1.03 is about to fall by half. If the futures were in fact to achieve the Hidden Pivot target of 53 cents, that would represent an 83% drop from 2011’s all-time high of $3.08. Coffee lovers may have something to look forward to, but they should be careful what they wish for, since the implication of coffee beans selling for 50 cents a pound is that the world by then will be chest-deep in a deflation of falling wages, plummeting asset values and significantly lower corporate profits.
My outlook has been bearish, with a 45.29 downside target, notwithstanding a couple of short-covering eruptions along the way. I am now lowering the target to 43.83, however, on the basis of the chart shown. Your trading bias should be bearish until the target is reached, or very nearly reached, but if and when that occurs, you should reverse the position and get long with a stop-loss as tight as 0.20 cents. I’d suggest a good-till-canceled bid of 43.88, since it’s possible the stock will turn without quite having reached our number. If the order fills and survives the stop, tune to the chat room or this page for further guidance. _______ UPDATE (November 13, 8:33 p.m. EST): The stock has lost my interest and attention, so I’m taking it off the front page for a while. One final note, however, that could prove useful to camouflage traders: At Wednesday’s closing bell, it reversed the bearish polarity of the last three weeks with the bullish impulse leg shown (see inset, a fresh chart). ________ UPDATE (November 26): After taking its sweet old time reaching my 43.83 target, Facebook has taken a lunatic bounce this morning from within 23 cents of it, hitting a so far high of 46.08. If you loaded up near the low, please let me know in the chat room and I’ll provide tracking guidance. Whatever you may have bought, half should have been exited by now for a partial gain.