Wednesday, June 23, 2010

AAPL is one of the very few stocks for which the May 6 "flash crash" became a corrective leg in a still-viable long-term bull market. That's the good news.  The potentially bad news, at least for the intermediate-term, is that Monday's high at 279.01 came within 1.85 of an important Hidden Pivot rally target at 280.86. If the stock feints higher over the next day or two, reaching that number, I recommend shorting a round lot of stock with a stop-loss at 282.01.  Although I am not bearish on Apple's long-term prospects, this looks like as good a spot as any to attempt shorting the stock. ______ UPDATE:  We'll put this one aside for the time being, since AAPL has worked lower.

The futures flirted at day's end with an 1190.75 target disseminated in the chat room before cracking the support and touching a low of 1189.25.  The 1.25-point overshoot is sufficient for us to infer that more weakness lies ahead, and so I'd suggest that traders -- including, possibly, night owls -- look to get short near 1104.00, the midpoint support that was cracked on the way down to 1190.75. A mechanical short from that pivot is not advised; rather, you should look for camouflage -- meaning, perhaps, an entry at the point 'X' of a downtrend on the one- or three-minute chart. In any case, 1104.00 is the most logical spot for a short-squeeze to sputter out Tuesday night or Wednesday morning, although the futures may not get that far.

Silver's lesser charts look better fortified to buck adversity today than Gold's, but the July contract could still fall to as low as 18.115 if bears rampage. Looking on the bright side, and taking it one small step at a time, a print above 18.890 would indicate more upside to 19.040, and a close above that Hidden Pivot resistance would telegraph a resurgence to as high as 19.735 over the near-term. That last target would be subject to a possible stall at its sibling midpoint, 19.165.

We continue to hold two August 98 puts for 1.06 and four July 96 puts for 0.70.  DIA bottomed yesterday almost to-the-tick on the target I'd flagged in the chat room, but the weak close suggests that selling could gain momentum today. Let's be ready to leverage disaster with a "stink offer" of 1.40 for four July 90 puts, good-till-canceled. If this short is filled, we will have legged into a $6 vertical put spread with $530 of profit potential for each spread, a worst-case gain of $350 for the entire position, and no possibility of loss. For your information, the Diamonds would need to fall to around 95.79 this week, equivalent to about 7%, to push the July 90 puts up to 1.40.  This estimate is based on a moderate increase of about 6% in the volatility of July options.  The parameters I used are shown in the option calculator (inset).

The hourly chart is still working on the bearish impulse leg begun Monday, implying that if the downtrend continues, we could hazard a bid at 1227.40, the midpoint support shown in the chart. The trade will remain valid as long as the point 'C' of the pattern, 1244.00, has not been exceeded. Please note that the futures would be indicating more downside to as low as 1210.80 if they close beneath 1227.40 or trade more than 2.50 points below it intraday.  A six-tick stop-loss is suggested for the 1227.40 bid.  Alternatively, a bullish thrust would be unimpeded to 1250.70, a midpoint resistance tied to a 'D' target at 1269.80. The first hint that bulls have regained control would come on a 1244.40 print, one tick above a look-to-the-left peak that is nicely visible on the 15m chart. ______ UPDATE (10:38 a.m. EDT): The futures ascended to a higher platform overnight before diving this morning, so we did nothing on the order. The new pattern projects to 1214.20, and because the selling has already breached the 1230.80 midpoint, we should infer the target is likely to be reached. To turn things around, bulls would need to punch the futures up to at least 1237.20 within the next couple of hours or or so.

Both the Diamonds and the E-Mini S&Ps finished the day on lows that precisely matched targets that I had flagged in the chat room.  We were briefly long some calls in the former, trying to bottom-fish, but with just 20 minutes left in the session, we scratched the trade rather than take our chances overnight.  The fact that DaBoyz were unable to get a short-squeeze going off some decent Hidden Pivot supports implies that the weakness could snowball when stocks open on Wednesday.

Will a squabble with his Afghanistan troop commander be the undoing of the Obama presidency?  And will that prove to be the straw that broke the camel’s back on Wall Street, which has been blithely buying up shares for sixteen months in the face of the worst economic crisis since the Great Depression? The Republic is already reeling from the disaster in the Gulf of Mexico; from the looming bankruptcy of scores of states and big cities; from the just-begun, second wave of the housing bust; from the mountainous juggernaut of new taxes that will be needed to pay for Government’s breathtaking expansion into healthcare and just about everything else. Add in a decisive failure in Afghanistan, and there are more problems than the November elections could conceivably resolve. It’s one thing to hope that America will toss the bums out, but we don’t envy their replacements the task they will face if the economy’s plunge is approaching terminal velocity when the new Congress is sworn in in late autumn. In the meantime, we won’t quibble with Mr. Obama’s decision to call Gen. McChrystal on the carpet. It was an unfathomable lapse for a military man with a crucial role in the nation’s defense to loosen up in an interview with, of all publications, The Rolling Stone.  He made the President look bad by saying Obama had seemed “uncomfortable and intimidated” at a meeting with military brass.  As plausible as this sounds, McChrystal should never have brought it up. Under the circumstances, the President has no choice but to project forcefulness in dealing with the errant general. But fire him?  The general’s war record in Iraq earned him the respect of his troops, and the last thing they need is to lose their commander because he spoke rashly. Moreover, the