March 2010

Late Monday evening the E-Mini S&Ps were continuing their annoying little jig  just inches from our 1171.25 stop-loss. Set-it-and-forget-it is how we handle this kind of tedium — and let’s not be disappointed if we get stopped out for a $2,400 gain.  If the futures should close a point or more above the stop, we should infer they're bound for a minimum 1186.25.

Hard to believe that the dirge which occupied us on Monday has slowed even more as the evening has worn on. DaBoyz are obviously looking for something anything to help them apply the old squeeze-arooni, but so far there has been nothing in the news to abet this tiresome game.  If and when the move comes, I've furnished a target in the E-Mini S&P that can serve as a minimum upside objective.

(Editor’s note: We wrote here yesterday that mortgage forgiveness would crater the housing market to much greater depths, with homes ultimately falling 70% from their peak values.  The following response, from “Donniemac,” was one of the more interesting posts in the Rick’s Picks forum. He sees signs of a recovery, but also the death of the America Dream for many chastened borrowers.) Loan balances are either paid by the bank or the lendee. Therefore, the someone who is going to “pay” for the housing bust is the banking industry. And, eventually, the taxpayer probably will be called upon to prop up the banks -- maybe through very liberal tax write offs of bad debt or through another round of bailouts, who knows? What the collective “we” need to have happen is to have the current economic growth be real. I know that doom-and-gloom attitudes seem to be the norm, but from my view, a return to a functioning economy is slowly becoming a fact. But there will be a large number of citizens who will have their lifestyles drastically altered -- in particular, early boomers who are, say, 55 or older and who did not create any savings to speak of. I know, as my wife and I have a family full of them. And some of them are running scared. But I am off-topic. As the economy starts to gain some momentum, the pain of deflating the housing bubble can be eased, hopefully enough to not put economic activity back into a tailspin. The big unknown, IMHO, is how are the masses going to react to not being able to satisfy their consumer itch at the flick of a piece of plastic? For sure, the extension of unsecured credit, or credit lines secured by home equity, is going to

Copper appears ready to impulse to twenty-month highs.  After jumping on March 1 in response to earthquake news from Chile, the futures have consolidated within the range that was defined that day and the next.  But in the last 48 hours of trading, copper has traversed most of the March range and is poised to break out to the upside.  Traders should look for a way to get long based on a small intraday pattern, ideally one offering camouflage.  (Posted by Doug McLagan)

The futures surpassed our 82.17 target by just 0.07 points, then slid steeply into week's end.  That doesn't tell us much by itself, but we'll have a better idea of how much weakness may exist below the surface if and when DXY interacts with a Hidden Pivot correction target at 81.37.  Sunday night's low was holding 0.06 points above it, but it would take a reversal and a print today exceeding 82.03 to put bears on the run.

The daily chart yields a mildly bearish picture for the near-term -- in this context, meaning the next 4-7 days. The outlook would change to very bullish if the futures can hit 1148.25 this week, a feat that would surpass no fewer than three external peaks.  There are no compelling camouflage opportunities in this environment, although a rolldown from around 1120.00 would set up a possible bottom-fishing opportunity near 1089 later in the week.

We hold two April 48 puts for a profit-adjusted 0.56.  The Tradestation platform is ignoring my request for put-option prices at the moment, so I'm flying in the dark as far as the recommendation to close out one of the two puts for 1.32 is concerned.  Leave the order in for now, but check back an hour into Monday's session to see if there are any adjustments. My current downside target is 47.63, somewhat higher than the 47.09 target we had been using.

Now that we have Sunday Night Opportunism figured out, meaning we "know" that it always pays to fade the trend just ahead of a new week, we can hoot and guffaw as shares move higher tonight. With the futures currently up 3.50 points, the implication is that DaBoyz are reading weakness, backing away from their offers so that widows and pensioners can foolishly chase the index futures higher.  So what to do? Although I rarely suggest playing fast and loose, because we are short one contract, effectively from 1220.00, we can afford to gamble a little. Continue to use a fixed stop at 1171.25, but make it o-c-o with an order to cover the short at 1144.00.  The worst we can do, in theory, is come away with a $2400 profit. If you are on board, continue to check for updates, since I may decide to let our profits run if the futures come down hard. _______ UPDATE (1169.25):  The futures rallied overnight to within a single tick of our stop-loss, but the selloff since has been too shallow to suggest DaBoyz are about to loosen their iron grip on shorts' cahones. In any case, we'll simply stick with our plan, using the stops given above.

Gold has made its move relative early for a Sunday night, spiking to a high on the opening bar before selling back down to unchanged.  I've looked at a bigger picture in Monday's touts -- one that portends at least mild weakness this week. Index futures are higher as of around 1:15 a.m. EST, but the rally feels like a fake.