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From the monthly archives:
March 2010
Predictions of higher long-term Treasury rates suddenly appear to be coming true. On the last day of 2009, the 10-year yield reversed two ticks past the midpoint of a bullish weekly pattern that began at the low rate of 2.46%. Yesterday that midpoint was decisively breached, signalling a move to the “D” target of 4.66%. The breach was reflected in the sharp move down in the June 10-Year Notes futures during the last two trading sessions, forming a powerful impulse wave that wiped out an active bullish pattern. We will watch the notes market for an opportunity to get short according to hidden pivot principles. (Posted by Doug McLagan)
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There is no change in my outlook, given here earlier as follows: “The pattern from which the 1073.20 target disseminated yesterday was derived looks too pretty not to play out. You can bottom-fish aggressively, and this time I’ll leave the stop-loss up to you. It can be as tight as 4-6 ticks. If the target gets bombed, however, we’ll need to consider the 1044.50 structural low — early February’s bottom — as a minimum downside objective.” Alternatively, a print today at 1096.90 would be most encouraging, since it is where complacent bears who watch the intraday charts closely might start to feel threatened.
With a thrust to 82.25, the rally has slightly exceeded our 82.17 rally target. That’s a Hidden Pivot, and although I didn’t expect it to work precisely, I did expect DXY to choke, sputter and wheeze somewhere very near it. Actually, I’d be surprised if it proves to be a pushover, but we’ll know soon enough. Let me therefore reiterate that dollar bears should dive for cover if DXY closes above the resistance.
This vehicle has been very accommodating lately, allowing us to catch some nicely tradable swings with great precision. Yesterday we shorted a Hidden Pivot target at 1175.75 with a 1.50-point stop-loss that proved more than adequate. If you initiated the trade on a single contract, use a fixed stop at 1163.00, switching to a four-point trailing stop when 1155.00 is hit. If you entered on four contracts, which is implicit unless I have specified otherwise, cover two of them at these levels, tie another to the same conditions governing the single-contract short, and let the remaining contract ride. Our paper gain on the position at these levels is $3150. ________ UPDATE (9:48 a.m. EST): Da Sleazeballs ran the futures higher overnight on zero volume — that is what They do best, even if it is Their only trick – and so we exited the single contract on an 1163.00 stop for a theoretical gain of $625. On the multi-lot position, partial-profit taking has left us short one contract with a 1220.00 basis. For now, use an 1171.25 stop-loss that is o-c-o with a buy-stop at 1156.00. _______ FURTHER UPDATE: Our short survived the rally; however, the subsequent plunge did not permit us to cover the contract — for a $3200 theoretical gain — since the low occurred at 1156.50, two ticks above our bid. We are still on track to beat Mr Market on this one, so don’t sweat it.
The mortgage relief plan just announced by B of A is the most consumer-oriented idea to come out of the banking sector since real estate prices began to implode in 2007. The goal of the program is to allow individual mortgages to fall to a level where they approximate the market value of homes whose value has fallen underwater. B of A, the nation’s largest mortgage lender since acquiring Countrywide in a shotgun wedding, estimates that about 45,000 customers will qualify. However, because other banks will be under pressure to match the offer, the number of beleaguered homeowners who could get some relief could eventually be ten times that. We doubt that would suffice to stabilize prices throughout the » Read the full article
Immediate downside exposure on the weekly chart is to around 377.95, the Hidden Pivot midpoint of the pattern shown. If the target should be exceeded on a closing basis for two consecutive weeks, however, the implication would be bearish indeed, since the ‘D’ sibling of the target lies at 321.92. My gut feeling is that the midpoint will hold, and this hunch comes from the fact that HUI has already aborted one downtrend in the corrective cycle begun in mid-January. The turn higher came from well above the midpoint support as well, and it suggests a lack of conviction on the part of sellers.
Converging hidden pivots should provide support to the Euro just above the 1.3250 level. The midpoint of the pattern on the weekly chart is at 1.3251, and the “D” target of an intraday pattern is at 1.3253. A print of 1.3239 would leave no doubt that both targets had been breached, and this level can be used for stop orders by traders willing to risk about as much as we ever recommend doing. Traders preferring to risk less should bid just above the 1.3253 pivot with a stop a few pips below 1.3250. (Posted by Doug McLagan) ________ UPDATE (4:00 a.m. EST, 29 March): Discussions in the chat room of how to judge whether a target has been hit or missed prompt us to cancel this trade recommendation now, because the approach to the midpoint of 1.3251 on the weekly chart, although not quite an unambiguous “hit,” was impressive enough to invoke the “no sloppy seconds” rule.
Homeowner ‘Rescue’ More Like an A-Bomb
by Rick Ackerman on March 29, 2010 5:08 am GMT · 15 comments
Although Bank of America has won praise from the news media for offering to reduce the mortgages of tens of thousands of underwater homeowners, Rick’s Picks readers were less kind in their assessment of the new relief program. One reader who posted in the forum saw it as an act of desperation – B of A’s only hope of keeping foreclosed assets from being liquidated at street value. “[The bank is] leveraged so highly that they have no choice but to write down twenty percent rather than take one in the teeth,” wrote Mark L. We ourselves had called mortgage modification the most consumer-oriented idea to come out of » Read the full article