Thursday, October 15, 2009

I didn't look at the dollar earlier tonight because I had assumed it would be dead-cat bouncing off the 75.45 pivot that worked so well earlier in the day. Lo, it's 1:23 a.m., and DXY is doing a zombie-walk toward the edge of a cliff. We all knew that Bernanke, Geithner and friends had ceased to even pretend that they want the dollar higher.  Not that they don't -- only that merely saying so no longer triggers even a heartbeat, much less the kind of rally that could panic shorts. The powers that be evidently have decided that it's better for the dollar to take its course than for the central bankers to be perceived as powerless to do anything about it.  Nor would our ostensible allies have their hearts in it if they were asked to say a kind word for the dollar. From a technical standpoint, the next Hidden Pivot with the potential to reverse the trend, albeit probably only briefly, lies at 74.36.  If it gets shredded as quickly as the one at 75.44, however, our major target at 72.93 could be achieved much sooner than we had imagined.  At the moment, DXY has not yet leapt into the void; it is just probing for traction not far beneath Wednesday's lows.  That is why gold has not yet taken off.  But if the dollar should slip even a teensy little bit from here, the December Comex contract will be banging against our 1074.50 target in a New York minute.

Citi's very capable handlers are oozing the stock up to a 5.04 Hidden Pivot midpoint whose conquest would clear a path to at least 5.97.  The niggardly, risk-averse trader in me wants to try and buy a dozen December 6-December 7 calls spreads for 0.09.  We'll attempt to leg it on, but with the precaution of a "contingency" order, as follows:  Buy twelve December 6 calls (CLX)  for 0.17, provided the stock is trading 4.96 or higher, but bid 0.15 for them otherwise.  _______ UPDATE (10:10 a.m.):  We bought a dozen December 6 calls for 0.15.  Ahead of the opening, I would have suggested lowering the bid on the supposedly bad earnings news, but I wrongly expected the calls to open on their lows.  Instead, the market makers sold them to us for 0.15, then offered them down to 0.13 a split-second later. Brokers have been barred for conduct less sleazy than that.  In any event, the earnings news had Citi booking a $101M profit after reducing losses on toxic assets. This is of course a load of crap -- Citi's toxic assets, and those held by other big banks, would sink the banks if the paper were marked to market -- but the relative truth of the earnings spin should not have caused the stock to sell off as badly as it did. Assuming the selloff was engineered to knock Citi down for the benefit of its sleazy handlers, we should see the stock recover sufficiently over the next couple of weeks to allow us to spread off the calls, shorting December 7s, as originally planned. 

But for the "contingency" I've placed on the Citi trade, it would be a perfect Pick of the Day.  Even so, subscribers who have never experienced a profit trading options should give this one the old college try, since it promises to yield succulent odds.   Regarding Pick of the Day trades, the goal of these occasional touts is to provide relatively easy trades that will effortlessly make you back the cost of your subscription. They are for traders of all levels of experience, but particularly for discouraged novices who have never cashed a winning ticket on puts or calls. I do NOT track my P&L, since, as you will already know, subscribers never do as well as they are  supposed to have done, if promotional literature is to be believed. However, I would encourage you to ask those in the chat room whether they have indeed made money with Pick(s) of the Day. These trades have seldom been losers, but I'd rather you trust the memory of someone who got dinged for a C-note blindly following my advice before you do so yourself.

The pattern is not perfect, but we should nonetheless respect the 10071.34 target in this vehicle, since it will be untainted by the kind of shenanigans that can sometimes waylay the index futures. I've carried the targeting to two decimal places because, well, you can never tell how close you're going to get.  If this intelligence is to be tradable, you'll need to interpolate.  The Mini-Dow equivalent is 10014.

On the basis of yesterday's action, I wouldn't change a word of my last analysis, so here it is again: The 1074.50 target looms as an important test of bulls' resolve. It will have implications for the intermediate-term forecast, since an easy move past it will greatly shorten the odds of a renewed burst to at least 1134. There is no question about the pivot itself, and that is why I expect to see at least tradable resistance when it is first touched.  There is a secondary pivot at 1080.00, and we should take account of it as well.  Accordingly, let's stipulate that if 1080.00 is exceeded on a closing basis, long-term bulls should consider jumping back in without further ado. Alternatively, it would take a print at 1043.70 today or tomorrow to threaten the bullish outlook without wrecking it.

The S&P futures, ever coy, are playing possum just a few points shy of a 1093.50 target flagged here yesterday. I'd stay away from this vehicle for the time being, unless you fancy playing ping-pong with it on the one-minute chart.  The target is still viable but perhaps less useful for trading purposes because of all the dithering that has occurred so close by. If you plan on shorting, a stop-loss no wider than 1094.25 should be used.  Above 1093.50 there is another clear target at 1100.75 that was well exposed during yesterday morning's tutorial session.  However, its close proximity to round-number resistance rules it out as an especially promising place to take a stand. _______ UPDATE (4;34 p.m.): The futures popped to 1093.25 at the bell, so I'll assume bullish and bearish subscribers alike were well satisfied by the outcome. The high was followed by a so-far 4-point drop, so if you risked only three ticks shorting there as suggested (shorting a tick below where I'd suggested, actually), you might have covered or taken a partial profit at 1090 or lower.  If you were long, as Sportdoc appears to have been, then you got a carefree ride to within a single tick of the top of yesterday's subdued march to recovery.

The island gap deposited on Goldman's chart yesterday was a relative sneeze compared to what would happen if the stock were to get anywhere near Jim Cramer's $240 target (which, to remind you, is well above mine at 213.62). Notice in the chart that a mere $25 thrust would surpass three external peaks on the weekly chart. At that point, bears could kiss the cruel and seemingly irrational world of Wall Street goodbye and run for the hills. Most immediately, the stock looks bound for at least 201.67, provided it can get past a midpoint at 193.39 by a bit more than the 193.60 high recorded yesterday.

Read them and weep, all ye despairing bears!  The chart below shows a wicked “island gap reversal” in the share price of Goldman Sachs, and it is as much proof as anyone should need to infer that yet more weeks or perhaps even months of false spring await U.S. stocks. When Lehman, Bear Stearns and all the rest were in crash-and-burn mode a little more than a year ago, who would have imagined that as early as 2009, banks and securities firms would be paying out a record $140 billion to employees?  Major banks, hedge funds and asset managers are on track to do just that, and it would top the previous peak year of 2007, when the impending financial crash was broached as an absolute certainty only by certain fringe characters in the newsletter world. Concerning Goldman, which lies within pitching-wedge distance of new all time highs, Jim Cramer thinks it’s bound for at least $240. That would represent a 25% rally from yesterday’s settlement price of $193. Cramer is even more bullish than we are, since 205.46, or perhaps 213.62 at the outside, is as high as Rick’s Picks can see for now. Incidentally, when Goldman was trading around $60, we’d projected a bear market low of $29.  We promised to don a grass skirt and dance the hula in Times Square if we were wrong, and so we were: The stock went no lower than $47. Live and learn, they say. We’ll let you know when it’s time for our big day in the Big Apple.  Olympia Sleet For those who have already given up on America, the huge Wall Street payout was not the only reminder of the Republic’s descent into darkness. Pictures of Republican turncoat Olympia Snow graced the front page of nearly every major newspaper.