Monday, April 11, 2011

We hold a round lot versus an April 57.5 call shorted for 1.84. My apologies for hyping a call sale at 3.00 earlier, since it never happened.  Do nothing further for now.  We will pocket the $184 if NEM is trading 57.50 or lower come Friday, so it offers good downside protection as well as an expiration that is just days away.  If the stock is above 57.50 at that time, I may suggest simply letting it get called away.   With a cost basis reduced by earlier profit-taking to 41.22 per round lot held, that would yield a theoretical profit of $1800. We acquired the position just three weeks ago. _______ UPDATE: The stock went out at 57.77, so letting it get called away gave us a theoretical profit of about $1800.  We'll try to re-establish a position when the time is right, so stay tuned.

The USD Index (DXY) and T-Bond futures are both approaching well defined Hidden Pivot supports, so we need to be on high alert for a possible major trend change in the markets.  I've provided a precise target for DXY, but here is the equivalent support for June T-bond futures:  117^18.  Both come from downtrending patterns that are clear and compelling on the hourly chart.

The dollar has been getting savaged lately, but please note that it is within pitching wedge distance of a compelling Hidden Pivot support at 74.48 (see inset). Currency traders should keep close watch, since it's hard to imagine that DXY will not take a tradable bounce from within a few ticks of that number.  Accordingly, scalpers should prepare to short the euro and yen with very tight stops when this happens.

Friday's powerful rally spirited the futures to within three ticks of the 40.975 rally target we'd been using.  This Hidden Pivot has been eclipsed in trading early Sunday night, although subsequent action has been choppy and trendless.  Since the 240-minute chart (see inset) now shows a compelling target at 43.910, we'll make that our next goal. Keep in mind, though, that a pullback to the midpoint is always possible, and it would be pretty wicked: 38.735.  The best way for bulls to avoid getting trapped is to monitor micro-patterns for signs of fatigue.  If buyers are weakening, it will be reflected in the failure of the 'D' targets of small uptrends to be reached, but also in corrective abc patterns exceeding their midpoints or even 'd' targets.

A big-picture target at 1502.70 should continue to guide us, since it remains my minimum upside objective for the near term.  Be on the alert for a possible stall at 1486.40, the Hidden Pivot target of a lesser pattern, or perhaps at 1490.80.  Both are good, legit resistance points, so an easy move through either would suggest that bulls have plenty of steam left.

The futures have opened on a gap higher Sunday night, hinting of distribution. The trend maxes out at 1329.25 on the five-minute chart, but higher highs are coming if DaSleazeballs are able to coax more buying from what has thus far been an anemic short-squeeze. They've recouped half of Friday's presumably meaningless selloff already, but it's anybody's guess what will happen overnight.  If the June contract simply heads higher, the 1355.00 target shown in the chart will be in play, along with its 1337.00 midpoint sibling.