Tuesday, July 26, 2011

The dollar is getting driven sharply lower at the moment, presumably bound for a Hidden Pivot support at 73.17 that can be found on the hourly chart. (A=75.10 on July 21).  If that number gives way easily, look for more slippage over the near term to as low as 72.04.

After failing yesterday by a dime to reach a target I'd proffered at 41.25, the futures turned tail and created a bearish impulse leg on the 30-minute chart. This demands caution for now, although it wouldn't be at all unusual for the futures to take things to the limit on the lesser charts before getting back in bullish gear. To judge sellers' resolve, let's use the 'p' midpoint and 'd' target of the corrective pattern shown. As always, a decisive breach of p would imply more weakness to the target; while a breach of the target itself could signal a bearish change in the intermediate-term trend.  Because impulse legs are in a "duel" on the hourly chart, camouflage traders may have to zoom down to the very lesser charts to find opportunity.

More and more, Gold futures are trading like Corn, Wheat and Soybeans -- i.e., generally doing what's expected of them, but not at a time of the day or in such a manner that catching a ride is ever easy.  Gold's caginess probably reflects the fact that "everyone" "knows" by now that it's going higher. Moreover, as the futures actually do move higher, they are attracting some veteran traders who may have tired of, for one, Crude Oil's churn. So what advice can I offer you tonight? A camouflage entry opportunity is in play at this very moment (12:25 pm.' EDT), since the August contract has pulled back to the 1615.90 midpoint of the pattern shown.

The stock has pulled back after tripping an entry signal for a ride to as high as 42.89 over the near term.  Since we're shooting for the 48.54 target of an even larger pattern, let's try to leg into a virtually riskless butterfly spread on weakness. For starters, in order to wind up with the Sep 42/46/50 'fly, we can bid 1.32 for four September 42 calls.  (They settled yesterday at 1.56. If we aren't even close, I'll simply adjust. There is no hurry to get this spread done.)  If the stock weakens today and we buy the calls at our price, we would then be looking to short-sell eight September 46 calls against them at a later date.  The third and final leg would come with the purchase of four September 50 calls, presumably on weakness in the underlying stock.  For now, though, put in a "stink bid" at 0.26 for four of them. They don't trade very much and are hard to buy, but it can't hurt to be ready if a few come in for sale at a great price.  My goal is to leg into the spread over the next 8-12 days at no cost. (In trader's parlance, that would be "doing the butterfly" for "even.") If successful, this position would give us no possibility of a loss at expiration, no matter where the stock is trading; but the prospect, in theory, of a gain of as much as $400 per spread if SLW is approaching 46 come September. Since every penny counts, I am requesting that you not jump the gun on this order or improvise.  Also, if an unanticipated opportunity should present itself intraday, I'll send out a timely e-mail alert to paid Rick's Picks members who have signed up for them.   (And

We'll see how much pluck buyers have if the futures fall beneath 1327.25, a midpoint support shown in the chart. Its 'D' sibling lies at 1314.50, and that would become my minimum downside objective if the midpoint gives way. (So far, it has been exceeded by just a single tick.) That last number is nearly coincident with a 1315.00 low recorded last Thursday, but it can be bottom-fished nonetheless with a 1314.25 bid, stop 1313.25. I am suggesting that you bid slightly below the actual pivot on expectations that a breach of the 1315.00 low will stop out enough traders to send the futures more than just a tick beneath the low.  Camouflageurs can avoid having to deal with this uncertainty by simply buying the first abcd upturn from near 'D'.

U.S. stocks fared somewhat worse than we’d expected on Monday, although the moderate weakness that occurred was a far cry from the collapse a hysterical news media had prepared us for.  Index futures got hit hard Sunday night, to be sure, but it was the kind of stage-managed weakness that occurs nearly every Sunday night. Typically, professional traders take advantage of whatever mood swings weekend news stories have stirred up. In this case, the nervous Nellies were primed to dump stocks at fire-sale prices, stampeded by a scare-mongering press that would have us believe the global financial system will unravel if Democrats and Republican’s can’t work things out.  On Friday, Mr. Obama planted the seeds of fear in the Mainstream Media’s tapioca-filled head, alluding to the possibility that the stock market would punish House Speaker Boehner for walking out on him. The major news outlets eagerly bought into this claptrap, and their fearful drumbeat grew louder and louder as the weekend wore on. By early Sunday evening, when index futures began to trade, widows and pensioners were sufficiently panic-stricken that they became the patsies of Murphy Men eager to fade their action. The Sunday-night crew has traditionally run off-hours sessions like a carnival midway, and they lost no time taking shares down to levels where buyers faced little risk. The E-Mini S&Ps plummeted the equivalent of 150 Dow points moments after trading began at 6:15 p.m. EDT.  That turned out to be the worst of the selling, much as we had anticipated, and stocks moved steadily higher for the next 19 hours.  We’d warned subscribers of a Sunday-night trap in the following note disseminated two hours before trading started:  “Securities markets were set to open Sunday night with no U.S. debt deal in place to calm investors.  This is the