November 2010

Our theoretical gain on the two Nov 300-310-320 butterfly spreads we'd held until Friday was $1360 -- about 35 times the sum we'd put at risk. I advised closing out the position in the chat room, and also via an intraday update to the AAPL tout, when the stock was crossing the "equator" of maximum profitability at $310.  AAPL did so not only on the way down from $316 that day, but on a subsequent bounce to 310.91 from 303.63, the intraday low.  If you missed exiting you can do so this week at will.  Even if you were to receive just $6 for the spread, your theoretical reward:risk would still have been 30:1. Keep in mind that we are still long the November 320 calls for "free," and that they could conceivably be sold for an additional profit if the stock should poke its pointed little headed above water this week.  In any event, I strongly doubt that AAPL has seen an important high, since it is one of the few companies in America whose huge stream of revenues could conceivably buck hard times.   Recall that when we put on the spread, it was based on a $315 target I'd projected when the stock was trading in September for around $280. I hadn't expect the target to be achieved before the November option expiration, but in the actual event AAPL surpassed our benchmark by $6 nearly two weeks early.

This flying pig has been losing altitude for a week, but not nearly quickly enough to satisfy the bearish appetite.  Still more dispiriting is that it would take a rally today to just 1211.50 to undo the candy-assed downtrend of recent days. Be that as it may, of all the punk patterns yielding potentially tradable targets, I like best the one that points to a Hidden Pivot support at 1184.75 for purposes of bottom-fishing.  An initial stop-loss at 1183.75 is suggested.

A previously identified Hidden Pivot support at 25.250 remains my minimum downside objective, and it can be bottom-fished with a 25.255 bid, stop 25.245.  Alternatively, and unlike Gold, Silver needn't rally strongly today to turn the 15-minute chart bullish.  The chart shows why a print at 26.490 would do the trick.  _______ UPDATE (9:34 a.m. EDT):  Hahaha how very cagey, the futures have topped so far this morning at 26.480.

Instead of speculating nervously about whether Gold is headed into some sort of horrendous decline -- a prospect which I strongly doubt -- let's simply focus on what Gold itself is telling us.  For starters, bulls would be back in charge of the day trend if they can push the futures above a very small peak at 1379.00 that's nicely visible on the 15-minute chart.  Failing that, and assuming no intervening move above 1375.50 (aka point 'c'),  a midpoint support at 1357.60 can serve as a correction target for the very near-term.  If it should fail decisively, however, we could infer that more downside awaits to at as low as 1339.80, its 'd' sibling.  A third Hidden Pivot support sits at 1354.70, and it looks to me like the most opportune spot to try bottom-fishing.  All three price points are shown in the accompanying chart. ______ UPDATE (5:29 p.m. ET):  How very coy.  The low of the day was...1354.80, a single tick from my number, but officially we'll score it as "nothing done," since, strictly speaking, the microscopic miss was as good as a mile.  If, for your own reasons, you did buy a tick off the low, you have a nice profit cushion to play with, since the futures are currently trading 1360.00, up $5.20 off the bottom.

Ten-year Treasury note futures are near a multi-decade high but will encounter resistance just above it.  Numerous bullish patterns suggest that ten-year Treasury note futures will soon make a new high for the multi-decade bull market.  The existing high was made in December 2008 at 128^22.5.  But a cluster of Hidden Pivots will provide heavy resistance just above that level.  If the futures can get past a midpoint pivot at 127^12, then the odds of an attack on the existing high will increase.  "D" targets just above the bull-market high are located at 128^27.5 and 129^07.  (Posted by Doug McLagan) _______ UPDATE (Saturday, November 13):  The rally peaked below the midpoint pivot that we were watching, and a quick drop of more than a point-and-a-half ensued.  This cancelled the smaller pattern in the attached picture and its 127^12 and 128^27.5 targets.  A decline to below 125^01.5 would be bearishly impulsive on the daily chart.

Gold appears to be headed down to a Hidden Pivot at 1375.5, if not lower.  On Thursday gold bounced precisely off of the midpoint of a pattern that had been identified beforehand in the chat room and in the morning webinar.  The subsequent rally peaked more than thirteen dollars higher, but a sharp twenty-seven-dollar selloff followed.  The pattern's "D" target of 1375.5 is now our minimum downside objective.  Traders buying the target should put stops just below 1375.0.  If Wednesday's low of 1382.2 is not touched or surpassed - and it has thus far survived two vigorous assaults - then a pair of upside targets including 1431.6 will remain active.  (Posted by Doug McLagan) _______ UPDATE (Saturday, November 13):  "If not lower" turned out to be the key phrase of this tout.  The futures bounced from 1377.3, missing our target, and after a seventeen-dollar rally they went into a steep thirty-five-dollar dive, slicing through the target and cancelling the bullish pattern referenced in the tout.

While I've accentuated the negative in bullion and the E-Mini S&Ps, eschewing Mr. In-Between,  I've also left room for a not-exactly-implausible rally.  This is warranted because of the way the market shrugged off Cisco blues yesterday.

Silver and the E-Mini S&Ps look to be chained to each other, like Tony Curtis and Sidney Poitier in The Defiant Ones.  They both showed the same reluctance yesterday to fall to a Hidden Pivot target so obvious you can practically feel its magnetic pull when you look at the chart. (See for yourself, inset).  The 25.250 target remains valid nonetheless and can be bottom-fished with the tightest stop-loss, since the 26.715 midpoint has already been trashed.  Alternatively, bulls would be back in charge, at least for the near term, following a print at 28.200.  In fact, a close above that number would put a 29.880 rally target in play.

The futures wasted an entire day failing to fall to an in-our-face Hidden Pivot support at 1194.00. The target remains valid nonetheless, and you can plan once again on bottom-fishing with an 1194.25 bid, stop 1193.50.  I don't intend for you to take this position home over the weekend, so don't initiate the trade so late in the day that you might have trouble exiting by the close.  Since the market's resilience yesterday came on a day when bad news from Cisco should have caused stocks to get schmeissed, there is always that chance they'll go higher today.  This would be a non-event, however, until such time as 1219.75 is reached, since that's where a bullish impulse leg would be created on the 15-minute chart. _______ UPDATE (8:58 a.m. ET):  I blew a nice trade by not following my own rule, which says:  Put the stop-loss below the next whole number -- in this case, 1193.00.  The implied 1192.75 stop-loss -- rather than the showboatingly tight 1193.50 that I advised -- would have caught the subsequent 13-point rally and provided an effortless ride to a gain of as much as $650 per contract.