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A Sane Way to Trade Crazy Markets

by Rick Ackerman on December 19, 2011 12:01 am GMT · 21 comments

Does the chart below of the Dow Industrial Average make you feel bullish? Bearish? Neutral?  We’re not sure ourselves. Although we’ve been using technical analysis for nearly 40 years, the chart doesn’t speak to us. At best, it leaves us with only a moderately bullish bias for the near term  – and a vague feeling that the meaningless price swings that have ruled the markets in 2011 could continue for longer than we would care to imagine, let alone explain  This is hard to believe, especially with so many dreadnoughts bearing down on the global economy and banking system. The U.S. is re-entering a recession that never ended for most households. China has hit the brakes in preparation for a slowdown in global trade, and the country’s real estate bubble appears to be deflating with a vengeance. Jihadists are planning naval “maneuvers” in the Strait of Hormuz. Bird flu and the bubbling Yellowstone caldera threaten us with extinction.

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Sunday Night Softness

by Rick Ackerman on December 19, 2011 12:01 am GMT

Stocks and bullion were soft Sunday night in turgid action, so I’ve emphasized mildly bearish possibilities in my touts for index futures and bullion.

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ESH12 – March E-Mini S&P (Last:1206.75)

by Rick Ackerman on December 19, 2011 2:34 am GMT

March E-Mini S&P (ESH12) price chart with targetsWe are long a single contract with a cost basis of 1156.00. The 17-point drop from Friday’s high missed our 1207.75 stop-loss by two ticks, but be prepared to exit on that number Sunday night. That would give us a gain worth a little more than $2500 on paper.  ______ UPDATE (7:29 p.m. EST): The futures touched the stop moments ago, so we’ll move to the sidelines. It’s always hard to tell about these Sunday night shakedowns, but we’ll avoid this one since both ‘p’ (1206.00 ) and ‘D’ 1197.75 coincide with previous lows that are likely to entice the riff-raff into bottom-fishing.  However, if the futures get away from the dirtballs who are maneuvering them lower at this moment, they could plummet to 1179.00. That’s a Hidden Pivot you can bottom-fish either with camouflage or an 1179.25 bid, stop 1178.25.  Its ‘p’ sibling lies at 1202.00, but bidding there is suggested only for those able to employ camouflage. If an order fills there via a picture perfect ‘camo’ reversal, I’ll establish a tracking position of four contracts for your further guidance. _______ FURTHER GUIDANCE (11:12 a.m. EST): We initiated a long position at 1206.00 following a perfect ‘camo’ pattern off an overnight bottom at 1201.75. On the 10-minute chart, the abc coordinates — all single-bar! — lay, respectively, at 1201.75, 1207.75 and 1204.50.  Two contracts were to have been exited at the 1207.50 ‘p’ midpoint, and a third at d=1210.50. This gave us a profit-adjusted cost basis of 1198.50 for the contract that remained. It was exited minutes ago at 1210.75, based on the bearish impulse leg created via a dip beneath the 1211.00 ‘external’ low recorded on the way up at 4:10 a.m. Our theoretical paper profit for each four-lot entered was $600. It would seem that in a trendless market that has been serving up crap for…months, that nailing tradable intraday swings in this vehicle is as easy as shooting fish in a barrel.

SPY – S&P (Equity) (Last:121.58)

by Rick Ackerman on December 19, 2011 2:46 am GMT

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SIH12 – March Silver (Last:29.460)

by Rick Ackerman on December 19, 2011 3:16 am GMT

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$GCZ14 – December Gold (Last:1283.60)

by Rick Ackerman on August 1, 2014 2:30 am GMT

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$ESU14 – Sep E-Mini S&P (Last:1927.50)

by Rick Ackerman on August 1, 2014 1:42 am GMT

Yesterday was the first time in recent memory that many of those who ‘bought the dip’ got creamed.  Traders should keep in mind that every bearish target implies a potentially profitable short with-the-trend as well as a bottom-fishing opportunity at the target.  In a bear market, the best place to initate the short will often be on the retracement rally to the midpoint pivot rather than at the conventional point ‘x’ of the downtrend.  This will hold true for the longer time frames as well.  Assuming we’ve entered a bear market, corrective rallies will tend to fail at their midpoint pivots, and ABCD downtrends to reach or exceed their ‘D’ targets.  My experience with the dot-com boom-and-crash is that heightened volatility makes swing highs and lows even more predictable than wafting rallies or sideways chop.

Concerning this vehicle, most immediately, the night shift has pushed the futures to the exact midpoint resistance (p) of  the minor abc uptrend shown. If  p holds, this would be as expected. As I’ve implied above, bear markets tend to produce corrective rallies that get no further than p. Night owls may not get much movement in off-hours trading, but the moves themselves will be more predictable and reliable than what you’re used to.

$NFLX – Netflix (Last:431.51)

by Rick Ackerman on July 28, 2014 4:32 am GMT

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As GDXJ was working its way south from around $43, my bearish forecast called for a washout low at exactly 40.42, a Hidden Pivot support of great clarity. I’d suggested buying down there ‘aggressively’ and with an ‘absurdly’ tight stop-loss.  This advice would have paid off handsomely for anyone who followed it, since the stock trampolined 64 cents yesterday off an actual low of 40.43, a penny from my target. Since a subscriber reported doing the trade as advised, I’m establishing a tracking position for the further guidance of all who may have gotten long. (He reported having bought 1000 shares off a 40.44 bid, but I’ll assume a more conservative 400 shares.)  Accordingly, I’ll recommend exiting half the position on Friday’s opening if you haven’t done so already.  We’ll impute any profits thereof to the cost basis of the 200 shares that will remain. _______ UPDATE (July 27, 9:48 p.m. ET): Exiting 200 shares on Friday’s 41.20 opening leaves us with a tracking position of 200 shares whose imputed cost basis is 39.66.  Exit another 100 shares on today’s opening and tie the rest to an impulse leg-based stop-loss on the 15-minute chart.  At the moment, that would imply bailing out on an uncorrected dive touching 41.73. ______ UPDATE (July 28, 11:46 a.m.):  We got sleazed when DaBoyz opened the stock on the so-far low  of the day, 42.40.  The good news is that such shakedowns usually occur because the smart money is trying to buy the stock.  In any event, I am tracking a 100-share position with an effective cost basis of 37.25.  For the time being, let it run. _______ UPDATE July 29, 7:23 p.m. EDT): Let’s turn the position into a covered write if GDXJ slips beneath 42.25 today (see inset, a new chart).  Specifically, you should short one August 16th 41 call for each hundred shares you own. Don’t simply bang out a sale on the bid when the stock hits 42.24, since you could get clipped for as much as 0.20-0.25 on the spread that way.  Instead, you should be deliberate and relaxed about the short sale of the call, since we are in the catbird’s seat and have little to lose by taking in some option premium at this point.  Shoot for a price midway between the bid and offer, and don’t rule out the possibility that GDXJ could snap back above 42.25 even in the process of breaking down. _______ UPDATE (July 30, 2:32 p.m.): _______ UPDATE (2:30 p.m. EDT):  I’ve yet to hear from anyone, but a ‘relaxed’ short could have been done anywhere between 2.03 and a current bid/offer of 2.45/2.90.  I’ll use a cost basis 2.55, about midway between, unless I hear otherwise.

$+PCLN – Priceline (Last:1238.98)

by Rick Ackerman on July 24, 2014 12:54 am GMT

A subscriber reported success yesterday legging into the 1340/50/60 August 16 call butterfly that I’d advised. He did so 32 times at no cost, as suggested, but it took a $10 move in the stock between legs to get filled so advantageously. His maximum profit would be $32,000  with the stock trading at 1350 come August 16.  Since he owns the position without cost, no loss is possible even if PCLN should all to zero or rally to $1000. We’ll do nothing further for now, but I’d suggest that those of you who were unable to buy the spread keep trying.  We’ll shoot for a partial profit if the stock rallies $40-$50 in the next few weeks but otherwise do nothing further. I’ve reproduced a chart that shows why our expectation of a $120 rally from current levels, to a 1358.18 Hidden Pivot target, is not exactly farfetched.  To that end, a pop above the 1270.59 midpoint pivot would be most encouraging. ______ UPDATE (July 28, 7:46 p.m. EDT): Yesterday another subscriber reported legging into ‘free’ butterfly spreads as suggested. Keep trying for at least one more day if you haven’t yet acquired a stake, since the spread will remain cheap as long as PCLN doesn’t blast off.

$+TLT – Lehman Bond ETF (Last:115.40)

by Rick Ackerman on July 23, 2014 5:36 am GMT

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$EURUSD – Euro/USD (Last:1.33950)

by Rick Ackerman on July 23, 2014 12:01 am GMT

I haven’t tracked currencies that closely, but because they tend to move very precisely to Hidden Pivot targets, traders should consider exploiting them whenever possible. Notice how EUR/USD has broken beneath a midpoint Hidden Pivot at 1.34841 after noodling around near that pivot for a few hours on Thursday. This suggests that it is bound for D=1.34197, at least.  You can bottom-fish there with a stop-loss as tight as 3-4 ticks.  Notice as well that there are two slightly higher possibilities for point ‘A’.  The correction targets they yield lie, respectively, at 1.34114 and, worst case, 1.33992.  I expect these numbers to work very precisely, so use them in whatever way suits you best.  Note as well that a last-gasp rally to p=1.34738 after EUR/USD has fallen a bit would be short-able. _______ UPDATE (July 24, 5:35 p.m. EDT):  Yesterday’s short-squeeze feint topped precisely at a midpoint Hidden Pivot (see inset, a new chart) that was originally support but which is now resistance. This price action confirms the pattern we’ve chosen as well as its ‘D’ target at 1.34197. At least one subscriber has confirmed getting short in the chat room.  _______ UPDATE (July 27, 10:43 p.m.):  Friday’s low occurred at 1.34206 — 0.00009 above our 1.34197 target.  Shorts should have covered there, but if you were able to bottom-fish the low and catch a piece of the 144-tick rally that ensued, please let me know in the chat room and so that I can establish a tracking position for your further guidance. _______ UPDATE (July 30, 2:43 p.m.): The futures have breached the lowest of the targets I’d provide from the lesser charts. This implies that a bigger-picture target at 1.32091 is in play. The chart(see inset, a new one) shows this.

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The Dollar Index turned higher yesterday an inch from a correction target that had been three weeks in coming (see inset). This portends a bullish change for the intermediate term.  The actual target is 79.74, and there is always a chance it will be breached. If so, there’s an alternative target at 79.62, but if it fails as well, especially without a fight, the implication would be more slippage to as low as  78.91, where a key low recorded in early May would thereupon beg to be tested. _______ UPDATE (11:17 p.m. EDT): Yesterday’s low occurred at 79.74 exactly. If the dollar is about to reverse and move higher, it will have to happen here, and now. _______ UPDATE (July 9, 2:33 a.m. ET): The dollar rallied strongly for a few days, but it is still not out of the woods because the move narrowly failed to clear an important ‘external’ peak at 80.38 recorded on 6/26. _______ UPDATE (July 16, 6:55 p.m.): DXY came within an inch of a clear and important Hidden Pivot rally target at 80.60 yesterday (see inset, a new chart). However, it will have to push past it to imply that the rally from the July 1 low (which had been predicted to-the-penny) is more than just a flash-in-the-pan. _______ UPDATE (July 30, 2:53 p.m.): 81.85, here we come!! (See inset, a new chart.)

This Just In... for Monday

Our good friends at Auerbach & Grayson are out with a storm warning for stocks and other risky assets in the first quarter.  The dollar, on the other hand, is in a strong primary bull trend that should see significantly higher valuations in the months ahead, according to Richard Ross, A&G’s global technical strategist.  Click here for the full 27-page report.

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The Hidden Pivot Webinar is two-day event is designed to teach you the risk-averse trading strategies Rick has taken to his seminars around the world. Once you have learned his proprietary secrets, you will approach trading and investing with enough confidence to make your own decisions without having to rely on the advice of others. The next Webinar will take place on August 13-14, 2014. For more information, or to register, click here.