Tired action generated “dueling impulse legs” on the hourly chart yesterday, but the constipated behavior this is predicting for the near term would be negated by a pop today above 1526.80. That would create a fresh, bullish impulse leg — and with it, perhaps, an opportunity to initiate a long position using the camouflage technique. Even more bullish than a poke above 1526.80, however, would be a close above 1528.70, the Hidden Pivot midpoint of the pattern shown. Once it has been breached decisively, the futures will be an odds-on bet to continue up to 1594.90, its ‘D’ sibling. (Want to learn how to do this, just like hundreds of students have done? Click here for a free trial subscription to Rick’s Picks that will give you access to a 24/7 chat room that draws not only graduates of the Hidden Pivot course, but combat-hardened traders from around the world.)
From the monthly archives:
May 2011
Since we’re short the E-Mini S&P from prices well above these levels, I’m offering a gambit in the QQQs that will allow traders to leverage the dead-cat bounce that looks likely to occur today or tomorrow. The downside target is 56.02, a Hidden Pivot, and so I’ll suggest buying four June 56 calls if and when it is closely approached (i.e., within about 6-10 cents). Stop yourself out of the position if the QQQs trade 55.87 or lower. The calls look like they should be trading for around $1.10 or so if the target is reached, but the price could easily vary by 10 cents or more.
The futures flirted with our bid without quite reaching it, denying us an opportunity to scalp against the short position we continue to hold. Today, try bidding 1303.50, stop 1302.75, but if you cannot trade “against the box,” check for an alternative elsewhere in today’s touts that would allow the use of equity options to bottom-fish. We are short a single contract with a cost basis of 1363.00, shooting for a gain of at least $5000 per contract. Holding the position will almost surely necessitate tossing out my usual, meticulous risk-management parameters, but it’s high time we stretched for extra bases.
We hold 300 shares from 42.01 against three June 40 puts with a 4.00 costs basis that reflects a loss booked on May 38 puts that we’d shorted. Continue to offer three June 40 calls short, but for 3.10 now.
Much as I hate the dollar, its so-far unimpressive thrusts must be seen in the context of correction lows in Gold, Silver and Crude that are holding precariously above midpoint supports. Check out today’s Crude Oil tout, since it details events that would likely send prices plummeting into the mid-$80s. If this happens, June Gold would go to 1413.50 and July Silver to 25.130.
Crude is in a correction from early May’s top that projects to as low as 85.07. That target is equivalent to the 1413.50 pivot given for June Gold. Although Gold’s midpoint support at 1470.00 has held almost precisely, the equivalent number in July Silver, 95.11, sits 43 cents beneath the so-far low. If that low were to be exceeded on a closing basis for two consecutive days, we would infer that a potential price avalanche lies ahead. To turn things around, bulls would need to push this vehicle above 102.41 within the next day or two. That would exceed a look-to-the-left peak recorded May 11 on the way down. It is visible at the level of the 30-minute chart or less.
The rally pattern shown in the chart stalled Friday within two ticks of a 75.74 midpoint resistance, but as of late Sunday night, oh-so-eager buyers have left it in the dust. This strongly implies more upside over the near term to the 76.51 target shown in the chart. However, in order to demonstrate real power, as opposed to the phony short-squeeze kind that has launched the greenback from its early-May lows, today’s effort would need to exceed the peak at 76.61 recorded on April 1.
Silver has held a crucial midpoint support at 32.300 for more than a week, but it has made almost no headway on the bounce. On balance, I’m bullish for the near term, but buyers will need to pop above the 39.565 look-to-the-left peak recorded May 4 to seize the advantage. Otherwise, the futures may demand a test of the 32.865 Hidden Pivot midpoint of the pattern shown. This stands to be an important number because, as you can see, its decisive breach would augur a further drop to as low as 29.28.
A nearly $6 leap on Sunday evening’s opening bar has been squandered in the last five hours, and now the futures have dropped back to unchanged, trading for around 1509.10. There are no opportunities that I’d rate as optimal, but a so-so pattern yielding the 1505.80 target shown in the chart could be used to bottom-fish with a stop-loss as tight as five ticks. You’ll be on your own if this one fills. ______ UPDATE (11:03 a.m. EDT): We did nothing, since a price spike at around 2:30 a.m. exceeded the point ‘C’ of our pattern, negating the buying opportunity. Shortly after 11 a.m., trendless volatility was picking up, and the future appeared to be headed, with great difficulty, toward a minor rally target at 1515.10
Debt Leaves U.S. Economy No Way Out
by Rick Ackerman on May 24, 2011 2:18 am GMT · 41 comments
[ Doug Graham, a frequent contributor to Rick’s Picks, finds striking similarities between the U.S. economy today and that of 1980s Japan just before the bottom dropped out. Can we change the big picture in time to prevent an economic collapse? Not likely, says Doug, who saw clouds gathering over Tokyo a generation ago, when he worked for a Japanese firm as a sales liaison to Compaq Computer in Houston. RA]
In the late 80’s I often visited Japan for work with the IC companies. It was an amazing time. They appeared rich and powerful. Their dominance was awesome, and with a little extrapolation it was obvious they would soon rule the world. They seemed unstoppable.
It was 1987 and I was employed by a Japanese IC maker and responsible for sales to Compaq Computer in Houston, Texas. For a twenty-something, it was a thrilling job. I was taking classes in Japanese. I’d visit Japan every few months. Two things jumped out at me regarding Compaq’s use of technology. Of course, they built computers, and computers were productivity machines, so they made sure that every Compaq employee had one and used it to its extreme. It made sense, since they could consume their own product and create their own productivity at cost. Second, e-mail. In 1988, Compaq was (internally) communicating like crazy electronically. 1988. Most companies weren’t and this was a great advantage. They ate their own cooking. » Read the full article