Friday, April 16, 2010

An intraday pattern in the June Euro futures gives us a "D" target that looks buyable.  The Euro has been dithering all week after popping up from a double-bottom on the daily chart, which came in just above the midpoint of a large weekly pattern.  If we like the odds that the Euro has made an important low, we should look for opportunities to get long such as this "D" target at 1.3457.  Traders can risk as much as $138 per contract with a buy at 1.3460 and a stop at 1.3449, but the small size of the pattern would justify a tighter range than that.  (Posted by Doug McLagan) _______ UPDATE (April 19, 02:20 a.m. EST):  The Euro futures dropped to our entry point, hesitated for half an hour, and then stopped us out by two pips.  The subsequent bounce has been anemic.

Harry has reminded me that the 11156 target given in today's Dow Industrials tout has a DIA equivalent at 111.50 that was flagged here a month ago (the original target was slightly higher).  So that we can at least have a horse in the race, let's plan on buying two May 108 puts.  Use a lowball bid of 0.76 in the first five minutes, but thereafter you can pay up to 0.86. _______ UPDATE (11:13 a.m. EST):   DIA has fallen sharplyb ut not before it head-faked in the early going, allowing our puts to trade down to 0.84.  We'll record them as having been bought for 0.86, a price that would have been available to anyone who attempted this trade. They are currentl 1.20 bid, so I'll suggest taking profits on half the position now.

We'll set the bar at 1166.40 today to alert us to a likely bullish resurgence.  Alternatively, any weakness that fails to grope its way down to at least 1144.40 should be regarded as mere noise.  It should also be viewed as a low-risk buying opportunity, since there's a Hidden Pivot at 1141.90 that looks well capable of providing tradable support.

Remember the sci-fi movie that ends with two possible newspaper headlineas:  1)  "Asteroid Will Collide with Earth"; or, 2) "Asteroid Will Miss" ?   Well, the Dow Average is in a similar situation, and you should check out the chart accompanying today's DJIA tout if you want to see what the possibility of a 1300-point rally looks like in stark Hidden Pivot terms. My gut is telling me it could never happen, but anyone who has subscribed to Rick's Picks for a while knows that I will always trust the charts before I trust my gut.

Top 10 Reasons Why Yesterday's High May Have Marked an Important Top: 1. It fell less than two points from a clear midpoint pivot on the long-term chart. Reasons 2 through 10:  See reason #1.  The actual pivot referenced above lies at 11156.37, versus an actual high yesterday of 11154.55. This is surely close enough to merit our rapt attention, even if it means we won't get to short the exact high.  And of course, if further evidence corroborates the significance of this midpoint, we must also be willing to accept that a decisive move above it would portend more upside to as high as 12477, the midpoint's 'D' sibling.  I did not spot this development right away because the C-D leg thus far doesn't look like it's even close to equaling half of the A-B leg.  An optical illusion, it would seem.  (Note:  The 11156 target was first broached here  a month ago in a Diamonds trading recommendation that was later canceled.)

Yesterday's near-miss dampened my ardor for shorting a Hidden Pivot at 1212.50.  This rally target is still valid in theory, but the trade would have felt best if it had been initiated mid-day yesterday and been followed by a nasty reversal.  Give it a 1214.25 stop-loss if the opportunity should present itself today, but don't expect too much. A better opportunity may await night owls, and I would therefore encourage you to exploit the possibility that yesterday's  high at 1210.50 will prove to have been an important top. This implies risking a few ticks on any abc downtrend(s) that show up on the lesser charts before the start of Friday's regular session.  If I have judged Mr Market correctly, and if a major top is indeed in, he will make it extremely difficult to get short, using the weekend caesura to screw nearly everyone.

We must confess that our heart wasn't in it when we suggested here the other day that the stock market's already superheated rally might accelerate rather than flatten with the approach of summer. Such a scenario is of course possible, and it did occur last year. But this time around, with stocks trading nearly 40% higher, it would flout Mother Nature in ways that are most difficult to imagine.  For who could possibly believe that an economy in the throes of a debt deflation could be revived by precipitously borrowing more trillions of dollars against future output, then pumping nearly all of that money into goods and services that are economically questionable at best and purposeless at worst? The strong impression one gets is that Wall Street believes it, since stocks have been in a relentless rise for months. It requires a healthy dose of cycnicism, however, to see what has really been going on.  In fact, the public has abandoned the stock market, leaving the hedge funds and trading desks to run a shell game on the taxpayers’ dime that makes it relatively easy to hog-trade stocks higher and higher on almost no volume. This has been occurring nearly every day for months: index futures waft higher overnight on light short-covering, setting up a second wave of short-covering on the NYSE opening. No Skin in the Game It is tempting to view this action as a wealth-creating perpetual-motion machine even if we know the game cannot continue forever. What is different and dangerous about this bull cycle, however, is that those who have been causing stocks to rise – Goldman Sachs, J.P. Morgan and other Masters of the Universe – have no skin in the game. They have simply been trading amongst themselves, applying relatively small sums of cash to the

(This trade didn't trigger, so I am offering it again despite my concern that stocks may have topped yesterday. RA)  We recently shorted this flying cinder block, and although it went higher, we came away unharmed because of some timely profit-taking. Let's give it another try at 58.17, a Hidden Pivot resistance from the hourly chart (A=48.80, February 23) that looks like it absolutely, positively cannot  miss.  Since  Pick of the Day trades are designed so that anyone can do them, preferably with an order than can be parked with your broker, I'll recommend using a 1.54 limit bid for two May 57.50 puts.  That's two cents more than they'd be worth in theory, but I'd rather  have you pay up slightly on this one than have you get shut out of the trade because of a too-stingy bid. Even so, because there are no guarantees of a fill, I'll suggest that traders who are able to monitor the stock intraday initiate the trade based on a move to 58.17 rather than on the puts trading about where they should be with the stock at that price.  _______ UPDATE (April 17):  Target's powerful rally sputtered out at  56.76, stranding our short offer not far above the high. Cancel the order for now. (Note: From time to time, when we spy low-hanging fruit, we offer a Pick of the Day. The goal is to provide very 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, such statistics are used mainly to trick skeptics into buying trading newsletters. Rarely if ever do subscribers achieve the level