Thursday, March 3, 2011

For your guidance, I was tracking a single-contract long position with a profit-adjusted cost basis of 1406.80.  However, the position was stopped out Wednesday afternoon at 1434.60, based on the risk-management parameters I'd advised.  The stop was predicated on the creation of a bearish impulse leg on the 15-minute chart -- a threshold that seemed reasonable if we are to let our profits run while protecting ourselves from the possibility of serious loss. In retrospect, however, I might have given this play more leeway, since we'd established an excellent entry point for a potential long-term hold. There will undoubtedly be other opportunities, so stay tuned if you're eager to jump in.  Our strategy will be to establish an initial position of four contracts, with the goal of letting at least one of them run till the cows come home. Most immediately, the futures were close to aborting a promising correction whose 1431.90 Hidden Pivot midpoint support might have suited that goal.  If the pattern develops optimally, as show, go for it with the tightest stop you can abide.  If you're camouflage-ready, I'd suggest using the technique to cut risk down to less than 0.30 per contract.

For reasons that I've detailed in today's E-Mini tout, The Mother of All Bear Rallies, aka "The Thing That Wouldn't Die," may have yet another death rattle in it.  Sure, I'm hoping like you that our QQQ short survives till, oh, 2015. But that doesn't mean we should turn our backs on DaBoyz while they torque up the broad averages for yet one more screaming-banshee thrust.

What a sorry mess yesterday's "action" was. The tired pumping did not change a bigger picture that hints of at least somewhat lower prices over the near term.  However, as we learned during yesterday's weekly tutorial session, there's a reason why bears cannot afford to be complacent at these levels.  Notice in the chart that Tuesday's high decisively exceeded the midpoint resistance of a bullish pattern that has been in motion since January 30.  What this implies is that although the futures subsequently dropped like a stone, they may be plotting a thrust to new recovery highs that could catch shorts unawares.  The  target is 1373.25, implying a rally that would be equivalent to nearly 500 Dow points.