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COMMENTARY for Monday
TODAY'S ACTION for Monday
Rick's Picks for Monday
The AB segment on the accompanying chart looks too elongated to generate a like C-D leg, but we’ll use it nonetheless, since price action at the 10261 Hidden Pivot midpoint can tell us if we’re on the right track. A pullback from that number, precisely, would indicate 10489 if it is subsequently breached.
We added a short August 102 put to our position for 3.10, making us long six August 98 puts and short three August 102 puts for a net debit of 2.28. On a delta basis, the position is nearly dead-neutral at current prices, but because it is a backspread, we’ll automatically get longer if DIA rises and shorter if DIA falls. For now, no position adjustment is necessary, but you should check this tout (or the chat room) for intraday updates, since a violent move could bring us opportunity.
Maybe today will be the day that bulls finally break through the tedium? As noted earlier, it will require a push above 1222.90 to create a mildly promising impulse leg on the lesser charts. Friday’s upthrust indicates more upside to 1223.60 if midpoint resistance at 1215.20 can be surmounted; however, it should be noted that over the last week-and-a-half, the futures have been unable to reach even modest rally targets.
A tout sent out Thursday night caught the high of the day within four ticks, allowing bears to get short ahead of the selloff that ensued. If you followed my advice to-the-letter, a two-contract position would have been stopped out on Friday for a theoretical gain of $1,350. However, if you initiated the position on four contracts and continue to hold one for a possible home-run as was suggested, use a 1.2686 stop-loss for now. A trailing stop of at least 35 ticks should be substituted if the futures touch 1.2545 to the downside. _______ UPDATE (July 13, 12:19 a.m.): You’re on your own now, but I’ll suggest tying the remaining short contract to a stop-loss triggered by the creation of a bullish impulse leg on the hourly chart. At the moment, that would imply a rally touching 1.2652, a tick above a distribution shelf created by last Friday’s price action. This is shown in the accompanying chart.
Put-holders should brace for a surge to at least 36.60 – or possibly 37.81 if any higher — if it appears that BP’s latest oil-gusher cap is working. Even if they manage to stop the flow completely, however, the company will face calamitous litigation in the years to come. For now, though, with implied volatilities in the low-to-mid-60s, put options are prohibitively priced — so much so that the prospect of making a profit with them seems dim even if the stock relapses. _______ UPDATE (July 13): Fascinating. BP gapped up to exactly $37.76 on the opening bar, capping a 15% run-up in just 12 hours of trading; then the stock plummeted to $35.71. This may or may not prove be The Top, but it sure as heck was a shortable top.
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Take any dozen good reasons for being bearish right now and they still don’t equal the bullishness of the chart shown. The undeniably compelling rally objective is 13085, a 4.8% move from current levels, and one can only surmise that the dusting the 12158 midpoint received on the last pullback (12/28) all but clinched a finishing stroke to the higher number. Moreover, it implies that bears shouldn’t get their hopes too high even if, in the next few days, the Dow plummets 324 points to retest the midpoint support. As of now, that would signal not weakness, but a screaming opportunity to get long. Hard to believe, really, but that’s what the charts say.
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Our Man Chuck Turns Bullish as All Get-Out
by Rick Ackerman on July 12, 2010 12:01 am GMT · 14 comments
Turns out we weren’t the only ones who must have been doubting every uptick of last week’s phony, witless rally. How could one not distrust a stock market that has been surging higher solely because of short-covering and the manipulation of index futures each and every night during the wee hours on razor-thin volume? Now, however, we learn that bullish sentiment is at an extreme low of 21%, according to the latest numbers from AAII. What this implies is that there are simply too many bears for stocks to collapse at this moment, notwithstanding the fact that the economy’s » Read the full article