The Dollar Index has blasted through key resistance at 80, threatening to “unwind” carry-traders who borrowed dollars for next to nothing in order to speculate on other assets. Chief among those assets is gold, which got savaged yesterday in a $100 selloff that seems hell-bent on testing September’s key low. The low lies at 1543, basis the Comex February contract, but we doubt that it will hold. In fact, earlier, we had told subscribers there was a 60% chance that February Gold was about to dive to at least 1459, a technical target derived from our proprietary Hidden Pivot Method. We shall see. In any event, gold and silver – as well as crude oil, the euro and the commodities complex– will come under heavy selling pressure if the short-squeeze picks up steam. If you’d like access our specific price targets for all of these trading vehicles in the days ahead, click here for a free trial to Rick’s Picks. » Read the full article
We locked in some bear spreads in the QQQ yesterday at great prices. That leaves us in the unaccustomed position of rooting for a rally so that we can complete a bull spread in SPY. We took the first leg of that position on Tuesday at so-so-prices, but we may be able to reduce our risk to zero if stocks take a strong bounce from here.
Near yesterday’s lows, we locked in some bearish puts spreads that carry almost no theoretical risk but which coud produce substantial gains if stocks stay weak into 2012. Specifically, we now hold two January 54-51 puts spreads for a debit of 0.07 and two January 53-50 puts spreads for a debit of 0.03. Both positions together cost us a total of $20, but they could produce a maximum profit of $1200 if things go our way. Effectively, we have gotten 60-to-1 odds on the QQQs trading 50 or lower by January 20. We’ll do nothing further for now, but I’ll send out an alert if a sharp downdraft in the broad averages should make it advantageous to cash out before expiration. Regarding the Cubes, yesterday’s plunge exceeded a 54.87 midpoint support by a decisive 29 cents, implying that weakness will continue down to at least 52.13, its ‘D’ sibling. Click here if you’d like to learn more about the Hidden Pivot Method, including how to identify and trade targets such as the ones used above, and to forecast trends with bold confidence.
We doted on the 1198.00 target during yesterday’s tutorial session, licking our chops at the prospect of getting in at a trampoline bottom. Alas, fatigued sellers were unable to push this pup any lower than 1202.50. The downside target is still valid, as is another less promising one at 1199.75, but bottom-fishing is recommended only for those who are camouflage-equipped. If you’re not but desperate to do something, anything, you can try bidding 1195.25 with a 1.00-point stop-loss. That’s the lowest target I can extrapolate from the 15-minute chart (see inset). _______ UPDATE (9:17 a.m. EST): I’m establishing a tracking position, since the 1198.00 target nailed the exact low of this so-far 20-point rally. Also, a couple of chat-roomers who work the graveyard shift evidently initiated positions at the low. Assuming four contracts purchased, cash out half of them here for around 1218.00. That will give us an effective cost basis of 1178.00 for the two contracts that remain. Tie them to a 1205.75 stop-loss for now, o-c-o with an order to sell one contract at 1226.00. Hitting the low to the exact tick was a simple parlor trick that you can learn in a month. Click here if you think you’re ready to try.
Based on a 155.30 rally target disseminated here on May 6, we bought four June 152 puts yesterday for 1.00 with DIA topping at 155.14. Since I advised closing out two of them for 1.14 intraday, we are left with a profit-adjusted position of two puts whose cost basis has been reduced to 0.86. Now, offer an additional put on the opening and hold the remaining put as a lottery ticket.
The climax of yesterday’s bullish stampede exceeded an in-our-wildest-dreams target by 56 cents (see inset), but when the dust had settled, short positions initiated by subscribers near an 89.43 Hidden Pivot were well in-the-black. For tracking purposes I’ll use 24 May 87.50 weekly puts that two subscribers reported buying for 0.11 in the chat room. They had tripled in price by the close, and so half should have been exited at some point along the way. However, since I made no explicit suggestion that you do so, I’ll assume none were sold and recommend that you close out half at-the-market on the opening. Of the 12 that would remain, offer six for 0.50 and hold the rest for a potential home run on Friday, when the puts are due to expire. The 0.50 offer to close should be entered before Thursday’s opening, since traders could conceivably exit a total of 18 puts at that price or higher on a gap-down at the bell.
Yesterday’s trade in this vehicle had not been offered as a tout, but a timely question in the chat room helped us identify an opportunity to pick up some cheap call options intraday. Here is what I wrote in the chat room: “The Auggie 160 market is 0.22/0/26, so 0.24 is the right price with GLD at 132.88. So, if GLD falls to our 131.83 target, the Auggie 160s should sell for about a nickel less (they have a delta value of about 0.04). So let’s bid 0.21 (an extra penny for good measure) for 28 of them., stop 0.18. We’ll worry about what to spread against them later.” Although the intraday low at 130.95 exceeded our target, the result was that subscribers were able to buy August 160 calls for 0.21, a penny off the intraday low.
This position is highly speculative, since there are two very bearish targets outstanding, but it has the potential to pay off at about 60-to-1. With a three-cent stop-loss on the calls, we’ve limited our theoretical risk to about $84. However, I’m now going to suggest giving the position a little more room by lowering the stop to 0.16. At the same time, and on a one-order-cancels-the-other (OCO) basis, I’ll suggest offering 28 August 163 calls short for 0.30 against those we hold. If the order fills we’ll own a virtually riskless position that can make us as much as $8400 if Gold rallies strongly between now and late August.
Wall Street did not exactly take Apple out to the woodshed following yesterday’s revelation that the firm has paid little or no taxes on foreign income of $75 billion. The stock flinched, down $2.73 on the day, but investors seem to recognize that revising 275,000 pages of tax code to force Apple to pay its fair share will require many years of wrangling on Capitol Hill. And who’s to say that the effort would not leave other loopholes just as easily exploited by the Sunnyvale behemoth’s clever lawyers and accountants?
Technically speaking, however, the news seems to have sapped some of Apple’s vital juices, since the stock failed for the second consecutive day to decisively exceed a small but nevertheless significant ‘external’ peak at 445.36 (see inset). That feat, trivial though it may seem, will remain crucial to the short-term picture. If and when it is achieved, expect the stock to rise to a minimum 449.9o, a Hidden Pivot target. If the pivot is easily surpassed, look for the bullish momentum to continue till week’s end, at least. Camo traders should position from the long side, using the 15-minute chart for leverage.
Yesterday’s rebound in this vehicle was strong, although not quite as compelling as the one in Comex Gold futures. Moreover, the intraday low exceeded the midpoint support of the pattern shown by a decisive 52 cents, shortening the odds that its ‘D’ sibling at 22.25 will eventually be reached. We’ll give bulls the benefit of the doubt nonetheless, since mining shares are unlikely to languish if they catch their first whiff of strength in bullion in many months. From a Hidden Pivot perspective, this vehicle needs to keep running without taking a breath until 29.83 (a 5/14 peak) has been exceeded. Camouflageurs should look for entry opportunities on the 15-minute chart, since there are some choice ‘externals’ to be found therein. ______ UPDATE (May 23, 12:33 a.m. EDT): The breath that GDX could not afford to take has in fact been taken, casting at least mild doubt on a bullish outcome. Worse than drawing a breath, actually, GDX sucker-punched bulls on the opening bar.
Tesla got short-squeezed to within 28 cents of the 86.72 target I’d proffered early Monday morning, but a second-wind rally to 88.00 suggests it’s got eyes for 104.44, the ‘D’ target associated with the first number. It can serve as a minimum upside objective for now, implying that all trades between here and there be positioned from the long side. We’ll plan on buying weekly puts if and when the target is reached, provided it happens before Wednesday of the given week. Please note as well that a lesser Hidden Pivot at 94.19 (see inset) has the potential to stop the rally cold and can therefore be used for spec camouflage shorts.
All signs point higher at the moment, but even Google will have to top somewhere. My best-bet for a short-able apex is 929.78, the Hidden Pivot target of a well-defined ABCD on the monthly chart (see inset). You can try shorting with camouflage at that number, or at the D target (in purple) of the lesser pattern, but until then all trades should incorporate a bullish bias. ______ UPDATE (May 23, 12:40 a.m. EDT): Yesterday’s selloff did not create an impulse leg on the hourly chart, but it is not exactly a sign of good health that the decline has begun without GOOG’s having quite achieved our 929.78 target. A further drop today exceeding 883.96 to the downside would add to the evidence that the recent top will be an important one.