Friday, October 1, 2010

Bullion futures were easily maintaining altitude Thursday night, although a possible swoon in gold would put into play a midpoint support I've flagged for night owls. My bullish bias for the E-Mini S&P persists and presumably needs only a speck of less-than-horrendous news to stampede nervous bears.

Silver was looking too feisty Thursday night to fall to a midpoint support equivalent to one in December Gold where I've suggested bottom-fishing. The futures would take wing on a print at 21.915, presumably sending bears diving for cover. A print at that price would create a fresh impulse leg only on the very lesser charts, but it would also open up a path higher that is likely to offer little additional resistance below 22.100.  A well-advertised target of higher degree at 22.505 still looms, but if it's easily breached the futures would be telegraphing a short-term finishing stroke to exactly 22.585.

A midpoint support at 1303.80 looked like a great place to try bottom-fishing with a stop-loss as tight as four ticks, but this was only if the point 'C' of  the pattern, 1311.90, was not exceeded to the upside.  At the moment, the futures are trading at 1311.30, having touched 1311.90 at the peak of this evening's recovery rally. The trade is still valid, but if it doesn't happen, it will obviously be because buyers would not let the futures fall.  Minor upside targets beckon at 1312.60, 1317.70 and 1328.10, but it is another at 1340.00 that I've been hyping that remains most crucial to the intermediate-term picture.

As detailed her earlier (see AAPL in archive), let's try to leg on a butterfly spread -- first by buying the Nov 300-310 call spread twice. We'll look to do this if and when AAPL falls to a midpoint hidden Pivot support at 280.44.  I've reproduced a calculator (inset) that shows the spread to be worth about 2.30 with AAPL trading near the target.  However, the fair price is very tricky to predict for two reasons: 1) time decay can hit hard on Fridays just ahead of the weekend; and 2) a falling share price can push implied option volatilities up.  Under the circumstances, I'll suggest monitoring the bid/asked spread on the Nov 300 and 310 series when the stock gets within 1.00 of the target.  One more thing: Do not attempt this trade if the target has not been reached by the final hour of the session.

If a Hidden Pivot support at 107.59 is hit with DIA having gone no higher than 108.14, bottom-fish there by buying two October 108 calls. They should be tied to 107.52 stop-loss in the underlying vehicle. To avoid paying up for the calls, a strict no-no in my book, I suggest monitoring the bid/asked spread as the stock closely approaches the target.  If you don't know how to use an option calculator -- as why should you? -- the best way to determine how much to pay for an option is to determine how much the pros are paying for it.  _______ UPDATE (10:25 a.m. EDT): The trade was a non-starter, since DIA went no lower than 108.11 overnight.

The futures are trading exactly where they were two weeks ago, although they've burned a ton of fuel going nowhere. We'd have thought that a run-up to an 1159.75 target signaled on Tuesday would have been unavoidable, but so far, even under the duress of short-squeeze hysteria, it has been avoided.  Since stocks appear to be capable of marking time on bad economic news, however, we can only surmise that the first mote of good news will "actualize" shorts so as to produce the all-but-inevitable squeeze to 1159.75.  Camouflage aficionados should look to board a small abc up-pattern once the 1143.50 Hidden Pivot midpoint of a larger one has given way slightly. If, on the other hand you're hoping for the worst, a fall to 1125.50 is possible if 1141.75 has not been exceeded to the upside first. Its sibling midpoint at 1133.50 can be bottom-fished by night owls with a three-tick stop-loss, but your edge will thin as dawn approaches. ________ UPDATE (10:17 a.m. EDT): The futures have been short-squeezed to modest gains after having failed to make any new lows overnight.  The not-very-ambitious target at 1159.75 remains valid, although one cannot help noticing that DaScumballs have achieved precious little loft this morning on ostensibly positive economic data. Once more, the profound underlying weakness of a market that continues to go higher nonetheless is its salient feature.

With a little more than a month to go, what’s left of the Congressional campaign promises to be the nastiest, most entertaining political spectacle in many a year. Your editor covered the political scene himself as a fledgling reporter for the Atlantic City Press, and at times it was quite a thrill. The highlight of one particularly heated mayoral election that drew 32 candidates was when one of them jumped on the back of the police chief and sank his teeth into the cop’s head. In the end, the man who won the race subsequently went to prison -- nothing unusual for Atlantic City, since that’s where most of the town’s mayors (and quite a few city supervisors as well)  wound up during the stretch of years between 1970 and 1990 that included the creation of the town’s ill-fated casino business. Even by Atlantic City standards, though, the rough and tumble of this year’s congressional elections is something to behold.  On Wednesday, New York Tea Party candidate Carl Paladino threatened to “take out” a New York Post reporter who’d asked Paladino to prove his accusation that Democratic challenger Andrew Cuomo had cheated on his now-ex wife. Paladino ducked the question and asked the reporter about a “goon” the Post had sent to photograph his daughter, who reportedly was born to a mistress and kept secret from his wife for a decade. Whom do you root for in these exchanges?  Probably half of the Post’s editorial staff really are goons – overweening, egregiously misguided muckrakers who would sell their children for an exclusive interview with…Lindsay Lohan. Paladino didn’t specify how he would make good on his threat, but if he should succeed, having one fewer editorial hack in this world would probably not be such a terrible thing. Allred Smear Tactics Over on the