We are long 800 shares @ 14.91 against eight February 33 calls shorted for 1.94. Do nothing for now, since the calls won’t even begin to hurt us unless the stock rallies above 35. We can only hope to experience that kind of pain! ______ UPDATE (10:07 p.m. EST): Using a one-cancels-other order, buy eight February 36 calls if the futures trade either 33.48 or higher; or 34.48 or lower. The lower number is a ‘D’ correction target and probably as cheap as the stock might get today. However, a print at the higher number would indicate a bullish breakout, and we don’t want the stock to run away from us.
From the monthly archives:
January 2011
The distributive pattern shown in the chart points ostensibly to 112^28, and that’s the number we should use to target any hellacious decline in the bonds. However, it shouldn’t go unmentioned that such a lengthy and tightly constrained sideways move in this vehicle is most unusual — a result, one supposes, of Fed T-bond purchases that for the time being are restraining the long end of the yield curve. The effort can only end badly, but so far there has been rather less strain than we might have expected.
If the secular bear market is indeed re-emerging with a vengeance, then the S&P’s failure to reach a modest 1305.75 rally target after an all-but-interminable series of mincing steps becomes understandable. That failure is in fact official, since the 1267.50 point ‘C’ associated with the target was exceeded to the downside on Friday. Further slippage today to beneath early July’s 1257.75 low would significantly increase the implied strength of the bearish impulse leg, which was catalyzed by a vicious head-fake on Friday’s opening bar. Note that a bigger-picture target at 1356.00 remains viable, since the ‘C’ of the massive pattern that produced it lies far, far below, at 1165.75. Even so, one gets the idea from the chart that Friday’s plunge represents a tone-change for a bull cycle that since early December has proceeded with arrogant certitude the entire way.
Silver is doing better than Gold Sunday night keeping Friday’s promising energy alive, but even it has begun to backslide shortly after midnight. A print at 28.575 would exceed a minor (i.e., “look-to-the-left”) peak on the hourly chart, refreshing the bullish impulse, so let’s use that price for now as a trigger threshold to signal a possible “camouflage” buying opportunity.
Gold’s droopy performance Sunday night is hardly encouraging, but it may be attributable to the fact that all hell is not breaking loose in the Middle East, at least not yet. In fact, the news stories of the hour center on whether Mubarak will be able to hold power in Egypt. Although it is certainly reasonable to pose this question above all others, I wouldn’t lay odds on a sanguine outcome, nor would I bet that other, very scary, issues will not surface as the week progresses. In any event, from a technical standpoint April Gold will need to pop to at least 1354.10 today to keep Friday’s momentum going. I’ve included a chart that shows why this price is relevant. Alternatively, until such time as 1349.00 is exceeded to the upside, a correction target of 1291.90 given here earlier will remain valid.
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If Google were to fall to 602.23, a midpoint Hidden Pivot, I’d be tempted to bid there aggressively with a stop-loss as tight as 601.99. A decline of such magnitude is not likely to happen today, especially since it would be bucking a forecast that calls for at least slightly higher highs for index futures. However, the target itself is compelling, and it will remain valid as long as 622.49 is not exceeded to the upside. ______ UPDATE (12:39 p.m. EST): GOOG ignored the pivot, falling instead to within 3 cents of the visually obvious support of Monday’s dramatic 601.23 low. Our theoretical loss on the trade was $24 per round lot, plus commissions. The too-obvious support aside, my hunch is that the breach of the pivot has ordained a further fall to its ‘d’ sibling, 581.97.
We’ll record a theoretical gain of $154 from two February 5 calls just to get this limping lump of brick dust off the sheets. There are numerous reasons why the stock might turn around, or even leap higher, but the whole point of the exercise was to make a cupla bucks on a hot tip, and that we have done. Fare thee well, Eastman Kodak.
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Dormant for Years, Fear Re-Emerges on Wall Street
by Rick Ackerman on January 31, 2011 6:29 am GMT · 14 comments
Has the Mother of All Bear Rallies breathed its last? We think so, although if this proves to be the case the climax will have occurred in an odd place, technically speaking. Although we long ago ran out of fundamental reasons to look for higher stock prices, our focus solely on technical indicators suggested that the insanity still had at least a little further to go. Specifically, we were looking for the S&P futures to rise at least 56 more points before topping out in a big way. That would equate to a rally of approximately 400 points in the Dow. Gold and silver quotes also sharply reversed direction on Friday, rising from a similarly unexpected place. Although we’d called for a potentially important low at 1296.50 for the February Comex Gold contract, the futures appear to have made a bottom well above that number, at a 1307.70 price that wasn’t even on our radar. » Read the full article