The response to Mario Cavolo’s glowing take on China and the global economy was eye-opening, to say the least. It’s not hard to understand why someone who lives and works in China, as Mario does, might believe that the country’s economic prospects are so spectacular as to all but preclude the possibility of a deflationary depression elsewhere in the world. We’re not so sure ourselves and have a few things to say about it below. But we were nonetheless persuaded by Mario’s argument, and by comments made by others in the Rick’s Picks forum, that China is doing many important things right, economically speaking. Some Westerners don’t come easily to this notion, since it requires one to put aside very troubling concerns about China’s repressive, authoritarian political regime; for it is both unfortunate and undeniable » Read the full article
Because T-Bonds have been dancing smoothly with Hidden Pivots lately, we should assume they are on their way up to at least 130^08 now that they’ve exceeded that Hidden Pivot’s sibling midpoint at 128^05 on a closing basis. Accordingly, traders should position from the long side — and please note that camouflage opportunities have been cropping up on charts up to the 30-minute level. Use of the single-bar ‘C’ would have been the key to any such trade that panned out.
We are short the August 102/August 98 put spread in a 1:2 ratio three times @ 0.76. It’s time to write off the likely trading loss of $228, even though we’ll continue to carry the position toward expiration. In retrospect, the loss came from my having missed exiting some long puts on July 7. We had a profit of nearly $1000 in the position at one time and I should have suggested nailing some of it down. Indeed, there will never be a good excuse for not taking at least a partial profit when puts “come home” as they did for us, however briefly (which in the world of put options means three days, tops).
Silver’s ostensibly sharp rally on Friday, like Gold’s, looks mediocre even on the 15-minute chart. We should want to see a push this week to at least 18.680 before we take serious encouragement, since that’s where a bullish impulse leg would be generated on the lesser charts. As always, the number of prior peaks surpassed without a pause will be crucial to our assessment of strength (or weakness) in the underlying vehicle.
For all of the jacking around on Friday, buyers were unable to create even a single impulse leg on the lowly 15-minute chart. The day’s rallies, such as they were, exceeded one peak but failed to muster the required second, and so we are inclined to see this modest upwardliness as just noise and no more. Even so, to avoid being caught unawares we must monitor two prior peaks on the daily chart carefully, since any unpaused rally that exceeds both would presage more bullish action well into autumn. The peaks lie, respectively, at 1129.50 and 1142.75, so it wouldn’t take much to reinvigorate the bear rally begun nearly a month ago.
Gold has backed off a small precipice, rallying from within just 0.60 of a well-advertised Hidden Pivot support at 1155.00. Look at the accompanying chart, however, and you’ll see that bulls will have their work cut out for them if they want to restore a positive look to the lesser charts. For starters, any rally this week will need to take on external peak #1, and at least one peak “along the wall” (#2=1206.70). I’ll wait to see what Monday brings before I exhort you to get excited. (Note: We’ll move to the December contract starting tomorrow. The corresponding peaks lie, respectively, at 1207.50 and 1210.70.)
Although the 525.27 midpoint support of the pattern shown evinced no discernible support, the pattern itself offers an attractive bottom-fishing opportunity that experienced Pivoteers will appreciate (see inset). Without going into detail, I’ll suggest simply that you acquire a bullish stake near 522.91 in whatever way suits your style. In this case, ‘near’ 522.91 means within four cents, since this set-up looks like it will work that precisely. Stop yourself out if the stock touches 522.82, and don’t pass up an opportunity to take a partial profit if the bounce expected from 522.91 hits 523.24. Thereafter, you’ll be on your own. (Note: If you buy options at the predicted low, stick with calls priced under $2, and plan on holding them for no longer than an hour, since they will be melting away quickly because of time decay. Ideally, you should try to spread them off by shorting calls of a higher strike against them for at least as much as you paid.) ______ UPDATE (10:19 a.m. ET): Boy, did I ever pick the wrong day to try stealing a few shares of this stock on-the-cheap! Apple took a psychotic, short-squeeze leap on the opening bar to $569 (!), goosed by news of the following: 1) a $30 billion increase in its stock buy-back plan; 2) an 8% boost in its dividend; 3) and a 7:1 stock split. Those who bought into this morning’s effusion should be asking themselves, Why is Apple being so nice to me? My guess is that it’s because the company knows that in the months ahead, especially with wireless carriers weaning customers off phone subsidies, price competition is about to impact Apple’s bottom line more than before. FYI, the rally projects to exactly 626.60, where p=560.59 on the weekly chart, and A=447.22 on 9/20.
The midpoint pivot at 101.28 that I’d flagged yesterday in the chat room as a place to try bottom-fishing appears to have served subscribers well. Several subscribers have reported getting long at that price ahead of the so-far 88-cent rally that has ensued. This morning’s low never exceeded the pivot by more than eight cents, and the rally since could have produced a gain of as much as $800 per contract for anyone who was aboard. Because of the fills that were reported, I’m going to establish a tracking position for your further guidance. Assuming four contracts were entered initially, you should take partial profits on half now if you haven’t done so already. For tracking purposes, I’ll assume an exit at 101.80, a dime below where the futures are currently trading.
I’ll further suggest using an impulse leg-based stop on the 30-minute chart. This implies that a swoon now to 101.19 would take one out of the position. The stop-out price will rise to 101.45 if the current bar’s low, 101.72, becomes a point C low (where A=101.46 at 9:00 a.m. ET). _______ UPDATE (10:40 a.m. ET): A very nasty downdraft has erased most of the rally in a single bar on the 30-minute chart. Stick to the 101.19 stop for now, but use a breakeven stop if you held only one contract. _______ UPDATE (April 24, 1:06 a.m.): There were four swings in excess of 70 cents yesterday — not quite violent enough to dislodge us from our position. For tracking purposes I am assuming that two contracts remain, with a profit adjusted cost basis of 100.48. Exit one of the contracts now for around 101.70 (or catch-as-catch-can when you wake up, assuming you slept on the position); then, use an impulse leg-based stop-loss on the hourly chart to create a stop-loss for the last contract. At this moment, that would imply stopping yourself out on an uncorrected plunge exceeding Wednesday’s 101.20 low. _______ UPDATE (1:33 p.m.): Profit taking has lowered the costs basis on the remaining contract to 99.26. As of this moment, using an ‘impulsive’ stop based on the hourly chart, the stop-loss for the remaining contract (or 25% of the original position) lies at 101.39.
The leaps have been opportunistic, powered by short-covering whenever the mood is right. Most of the time these days, however, the futures are taking mincing steps in both directions, creating a challenging environment for profit-seekers in the middle hours of the day. One thing to notice, however, is that the rallies, particularly in this vehicle, and whether weak or powerful, seldom proceed from the first signaled entry point. Instead, the ‘money trades’ launch from a second or third point-C lows of ABCD patterns, and they do it with such repetitious reliability that one can practically discard the first signaled entry opportunities routinely. This is the kind of price action we might expect when ‘everyone’ thinks that stocks will move higher on a given day. ‘Everyone’ can be right, but that doesn’t necessarily mean they can make money easily. For your interest today, I am including a chart that shows a modest rally target at 1895.00. I’m guessing it will be easier to get short there with a tight stop than to get long for the ride to it. However, because the futures will be in record territory at that point, we shouldn’t want to impede their progress too aggressively. _______ UPDATE (April 24, 12:50 a.m.): With yesterday’s rally — nearly all of it achieved in a single, short-squeeze bar toward the end of the session — bears are now trapped between the all-time high and a lesser peak just below it. Their acute, growing discomfort will likely be tradable, but not by way of any specific guidance I am able to provide nine hours before the opening bell. New record highs are coming, but for most traders, the process of getting there promises to be more pain than pleasure.
Since March 20, when GDXJ was trading for around $40, I have been looking for a potentially important low at 34.00. More recently, I revised that target to exactly 33.76, a ‘Hidden Pivot support’. Yesterday it came within a single penny of nailing the exact low of a vicious swoon. The low may or may not prove to be the last gasp of a correction that has been in progress for the last five weeks, but it stood to be an opportune place to try bottom-fishing. In that regard, quite a few subscribers reported getting aboard at or near the low, and so I’ve established a tracking position for their further guidance. It consists of 200 shares with a cost basis of 33.58. The price takes into account an initial purchase of 400 shares for 33.79, then the taking of a partial profit on half the position at 34.00. The bounce so far has hit 34.90, meaning GDXJ has trampolined $1.14 cents since hitting my three-week-old target. For now, traders should stop themselves out of the position if GDXJ breaches two prior lows on the 5-minute chart without an upward correction. As of this moment, that would imply placing the stop at 34.37 (and remember: it must be exceeded by an unbroken, downtrending leg). You should also offer a round lot (or half of the remaining position, whichever is greater) to close for 36.80, good-till-canceled. _______ UPDATE (11:38 p.m. ET): The herky-jerky spasms in the first 90 minutes altered our stop-loss so that it would have taken a 34.07 print to stop us out — 23 cents beneath the actual low. I’ll now suggest raising the bar by using an impulse leg-based stop-loss on the 30-minute chart. That would imply a fall today touching 34.29. Please note, however, that the stop could change if zig-zag action early in the session creates any distinctive new lows on the intraday charts. Our target for the next profit-taking interval is still 36.80. _______ UPDATE (April 23, 1:38 p.m. ET): A powerful surge today has hit a so-far high of 36.89, allowing anyone who was long to take a partial profit at 36.80 as suggested. For tracking purposes I’ll assume 100 shares with a profit-adjusted cost basis of 30.36. In practice, you should still be holding 25% of whatever position you acquired initially, with a 30.36 cost basis. For now, use no stop-loss. _______ UPDATE (April 24, 1:20 a.m.): For each round lot you hold, short one May 2 38 call if GDXJ gets within about 15 cents of 38.00. At that price, the calls should fetch around 1.10-1.20.
We don’t pay much attention to this vehicle other than at key turning points, but the short-term pattern shown looks like a lay-up for traders who see futures contracts as no more than bouncing dots on a chart, waiting to be exploited. There are actually two trade possibilities here: 1) a ‘camouflage’ short as USM slips below the 132^13 midpoint; 2) and a very tightly stopped long from within a tick or two of the 131^17 target. Good luck! Please report any fills in the chat room so that I can establish a tracking position for your further guidance. ______ UPDATE (3:17 p.m. ET): The short was tricky to initiate, but once aboard, your reward came quickly with a drop to a so-far low at 131^26. As noted above, the short should be covered and reversed near 131^17. ______ UPDATE (April 6, 3:57 p.m.): The low of Friday’s violent price swings was 131^21 — not quite close enough to have gotten you long easily. Although this could prove to be an important low for the short- to intermediate term, under the circumstances I’ll assume no subscribers were filled. _______ UPDATE (April 11, 1:03 a.m.): Next important stop on the way higher: 135^17. _______ UPDATE (April 20, 11:10 p.m. ET): Last week’s fleeting stab to 135^10 came within less than a quarter-point of my target — close enough for us to consider it fulfilled. It took the futures more than a month to get there, so we should expect this correction-or-worse to last for at least a week or so before bulls attempt to push T-Bonds to new recovery highs.