Price action looks opportunistically bullish– meaning there is no particular buying interest at the moment, only the menacing silence of predators waiting for that piece of news that will allow them to short-squeeze the dollar to the next level. The upthrust would need to clear the 76.43 peak recorded on March 28 to have any significance for us, since that would refresh the impulsive bullishness of the daily chart. However, even then the running start that will have been required to vault this structural resistance would necessarily diminish whatever power we might impute to the move.
Keep in mind that there is nothing “fundamental” to rally the dollar right now, only technical forces that have had months to build up torque. How much of it was spent by the carry-trade unwind of the last two weeks? Time will tell, but herky-jerky action will be our clue that there are still some nervous dollar-shorts out there. If you want to keep close tabs on the greenback but don’t subscribe, click here for a free trial subscription to Rick’s Picks. We are monitoring the dollar very closely ourselves because it has long been a given that its collapse will, finally, take the global financial system down with it.
If SPY relapses to the 131.86 downside target given here earlier, buy two June 132 calls as detailed here yesterday. If you are buying them to hedge the short position we hold in the E-Mini S&Ps, 50 option deltas per futures contract will suffice. Please note that an upthrust today exceeding 134.61 would be hazardous to bears over the near term, even if it wouldn’t necessarily presage a run-up to new recovery highs. ______ UPDATE (May 19): Boredom ran out the clock on us, so let’s cancel the trade for now.
The 1310.00 downside target is still valid, as is the bottom-fishing strategy given here earlier: buy 1310.50, stop 1309.50. Yesterday’s price action may have bored would-be traders death, but you need to be aware nonetheless that an upward reversal without the futures’ having quite achieved the 1310.00 downside target would pose a menace to bears. This would occur today on a 1341.50 print, provided the thrust to that number is unpaused once past the 1332.00 peak shown in the chart. We remain short a single contract from 1363.00, stop 1358.25.
A modest leap has surpassed April 18’s peak at 75.81, but notice how the rally fizzled before buyers could take on a slightly higher high at 76.15 recorded two weeks earlier. This is the kind of chicken-hearted action that I have described in today’s commentary, and it suggests that the current rally is not destined to become a hall-of-famer. Even so, we’ll keep an open mind, since an unpaused pop exceeding the April 1 high at 76.61 would indicate the rally is picking up steam, not fading.
We’re short the E-Mini S&P from last week’s high, but I’ve provided a strategy for going long ‘against the box’ to take advantage of an attractive downside target where a strong bounce seems likely. There are two ways to play, but if you are unable to buy ES contracts against those you are already short, you can hedge with SPY calls as advised. The short should be maintained in any event, but please note there is a stop-loss on the prospective long.
Because the last significant bounce came a few days ago from an exact midpoint support at 32.300 (see chart), it behooves us to take its ‘D’ sibling at 25.130 seriously. The lower number won’t be officially in play unless the futures close beneath the midpoint for two consecutive days or trade more than 15 cents below it intraday, but bulls will not be out of the woods until such time as they can muster a pop above the 42.325 ‘look-to-the-left’ peak recorded May 4 on the way down.
No change. A 1470.10 minimum correction target remains viable, but any lower would be telegraphing yet more weakness to 1413.50. Alternatively, it would take an upthrust exceeding 1529.30 to produce a glimmer of light for bulls, and nothing less than 1543.60 to turn the hourly chart bullish. Both price points are highlighted in the chart.
We’re short the ES, but I wanted to provide traders with a way to go long ‘against-the-box’ using this vehicle, since the downside target at 131.86 is such a hot little temptress. It is shortly before 3 a.m. in New York, and for whatever reason, my Tradestation platform is not displaying bids and offers for SPY options. Because of this, I’ll have to wing it with a recommendation that you buy two June 132 calls if and when SPY gets within a dime or so of the target. If you are hedging the short in ES, you’ll need to acquire 50 deltas worth of calls for each contract. All who attempt this trade should stop the position out if SPY hits 131.74.
We’re short a single contract from last week’s exact high, shooting for a theoretical gain of at least $5000 per contract. However, I’ve recommended that those who initiated the trade using three or more contracts have two-thirds of the position covered if and when the June contract closely approaches 1310.00, my minimum downside target for the corrective cycle begun from 1373.50 0n May 1. I’ll also recommend bottom-fishing at 1310.50, stop 1309.50. This trade can be done “against-the-box” if your broker will allow it, but also as a new position for those of you who currently have no stake. You should take a partial profit on 50% of the position at 1314.00 on a multi-contract position, switching to a 3.00-point trailing stop above 1328.00.
I have jettisoned my wonted, niggardly risk:reward parameters this time for two reasons: 1) even traders who are obsessive about risk management as I am occasionally swing for the fences; and 2) even if we get stopped out by a head-fake above 1358.25, there will always be another opportunity. In any event, we will keep shorting this little s.o.b. until we catch the actual top of the Mother of All Bear Rallies. As you can see, it’s possible to do this at every swing high without losing a dime if we are wrong. The trick is to take a partial profit if the pullback we expect from each Hidden Pivot rally target actually occurs. If you’re curious about how well we’ve succeeded at this, try asking in the chat room. And if you’re not a paying subscriber, click here for a free trial that will give you access to the entire Rick’s Picks site, including a 24/7 chat room frequented by veteran traders from around the world.
Price action looks opportunistically bullish– meaning there is no particular buying interest at the moment, only the menacing silence of predators waiting for that piece of news that will allow them to short-squeeze the dollar to the next level. The upthrust would need to clear the 76.43 peak recorded on March 28 to have any significance for us, since that would refresh the impulsive bullishness of the daily chart. However, even then the running start that will have been required to vault this structural resistance would necessarily diminish whatever power we might impute to the move.
Politicians Always Choose Death by Cancer
by Rick Ackerman on May 18, 2011 1:42 am GMT · 10 comments
[Governments’ efforts to prop up the global economy have produced a recovery that’s done little to help the working man. In the commentary below, our friend Tom McCafferty, a veteran commodity trader as well as the author of some critically acclaimed books on the subject, thinks we’d all be better off if the recession were allowed to take its course. Regardless, he notes, there will always be opportunities for astute traders. RA]
Do you want to die from a massive heart attack, or a long drawn-out bout with cancer?
And … why do politicians always choose cancer? The obvious answer is that cancer, despite how ugly it is, keeps them in power. As long as they are promising to pump money into everyone’s pockets, like drunken sailors on shore leave after several months at sea, they believe they’ll be kept in power. And that is the their only reason for being.
But luckily we are traders and every ill wind brings us an opportunity. The one that is coming now is either a default or bailout for Greece for sure, and maybe for Ireland as well. If Greece is totally bailed out, all those bears shorting the credit derivatives will be wiped out. The bulls, if there are any, would be dancing in the isles, obviously the Greek Isles. » Read the full article