It’s getting a bit late for a Santa rally, but you can’t blame DaBoyz for trying – trying every night, actually, after most U.S. traders have gone to bed and there are almost no sellers to resist the stock market’s natural buoyancy in a time of unprecedented monetary easing. We’ve lost track of how many times in the last month index futures hit their highs in the wee hours, only to fall into the red during the regular trading session. It happened yet again Sunday night when the E-Mini S&Ps wafted the equivalent of 90 Dow points higher on volume-less trading before dropping sharply to close off a hundred points. » Read the full article
The rally has made a mockery of the headline on today’s commentary. At the same time, it suggests that shorts had grown complacent, since bulls have never been capable of mustering this kind of buying power. Nonetheless, we must respect the fact that the upthrust is bullishly impulsive on the hourly chart and that it could go all the way to 1240.00 before hitting a Hidden Pivot impediment (A=1177.25 on November 30, B=1266.00 on December 8 = 1240.00 ‘p’). The proximal cause of this short-squeeze is an apparently successful auction of Spanish debt and an uptick in housing construction. Interestingly, the uptick is mainly in multifamily apartments, implying that the powerful bull market in residential rentals is starting to get legs.
Minor targets were exceeded so easily yesterday that we should skip the small stuff and consider bigger bearish patterns. One projects to 26.010, and we should consider it a done deal if the 27.970 midpoint support with which it is associated gives way easily. Both numbers can be bottom-fished, but more immediately we should look for subtle opportunities to get short. Just such a one was manifesting itself on the hourly chart as we went to press, and I’ll therefore recommend shorting on a sell-stop if the 28.855 entry trigger is hit. Take profits on half the position at the 28.755 midpoint, and on another 25% at D=28.550. With the single contract that would remain from an initial position of four contracts, you should use a bullish impulse-leg stop on the one-minute chart until morning. ______ UPDATE (2:13 a.m. EST): The short triggered around 9:45 p.m. but was stopped out at around 1:26 a.m. The theoretical loss was 11 cents, or $550 per contract. There was no chance to take a partial profit to reduce the risk, since the downtrend did not quite reach the 28.755 midpoint support of the pattern where we would have done so. In order to learn from this trade, I’ve substituted a 15-minute chart for the 60-minute so that you can see clearly where it went awry. To begin with, the 15-minute chart was where we should have looked for camouflage, not the hourly. And, as you can see, the ‘X’ where we initiated the short trade on the hourly fell within a bullish A-B impulse leg on the 15-minute chart. Under the circumstances, camouflage if properly applied would have told us to get long rather than short — and with much less risk. If you took this trade, please let me know in the chat room so that I can keep all who got trapped closely apprised, in real time, of the next Silver trade. And one more note: We should be especially careful about taking longs from these levels, since last week’s low exceeded by 30.5 cents an important midpoint support at 28.425 that I flagged here five days ago.
The leaps have been opportunistic, powered by short-covering whenever the mood is right. Most of the time these days, however, the futures are taking mincing steps in both directions, creating a challenging environment for profit-seekers in the middle hours of the day. One thing to notice, however, is that the rallies, particularly in this vehicle, and whether weak or powerful, seldom proceed from the first signaled entry point. Instead, the ‘money trades’ launch from a second or third point-C lows of ABCD patterns, and they do it with such repetitious reliability that one can practically discard the first signaled entry opportunities routinely. This is the kind of price action we might expect when ‘everyone’ thinks that stocks will move higher on a given day. ‘Everyone’ can be right, but that doesn’t necessarily mean they can make money easily. For your interest today, I am including a chart that shows a modest rally target at 1895.00. I’m guessing it will be easier to get short there with a tight stop than to get long for the ride to it. However, because the futures will be in record territory at that point, we shouldn’t want to impede their progress too aggressively.
Since March 20, when GDXJ was trading for around $40, I have been looking for a potentially important low at 34.00. More recently, I revised that target to exactly 33.76, a ‘Hidden Pivot support’. Yesterday it came within a single penny of nailing the exact low of a vicious swoon. The low may or may not prove to be the last gasp of a correction that has been in progress for the last five weeks, but it stood to be an opportune place to try bottom-fishing. In that regard, quite a few subscribers reported getting aboard at or near the low, and so I’ve established a tracking position for their further guidance. It consists of 200 shares with a cost basis of 33.58. The price takes into account an initial purchase of 400 shares for 33.79, then the taking of a partial profit on half the position at 34.00. The bounce so far has hit 34.90, meaning GDXJ has trampolined $1.14 cents since hitting my three-week-old target. For now, traders should stop themselves out of the position if GDXJ breaches two prior lows on the 5-minute chart without an upward correction. As of this moment, that would imply placing the stop at 34.37 (and remember: it must be exceeded by an unbroken, downtrending leg). You should also offer a round lot (or half of the remaining position, whichever is greater) to close for 36.80, good-till-canceled. _______ UPDATE (11:38 p.m. ET): The herky-jerky spasms in the first 90 minutes altered our stop-loss so that it would have taken a 34.07 print to stop us out — 23 cents beneath the actual low. I’ll now suggest raising the bar by using an impulse leg-based stop-loss on the 30-minute chart. That would imply a fall today touching 34.29. Please note, however, that the stop could change if zig-zag action early in the session creates any distinctive new lows on the intraday charts. Our target for the next profit-taking interval is still 36.80.
We don’t pay much attention to this vehicle other than at key turning points, but the short-term pattern shown looks like a lay-up for traders who see futures contracts as no more than bouncing dots on a chart, waiting to be exploited. There are actually two trade possibilities here: 1) a ‘camouflage’ short as USM slips below the 132^13 midpoint; 2) and a very tightly stopped long from within a tick or two of the 131^17 target. Good luck! Please report any fills in the chat room so that I can establish a tracking position for your further guidance. ______ UPDATE (3:17 p.m. ET): The short was tricky to initiate, but once aboard, your reward came quickly with a drop to a so-far low at 131^26. As noted above, the short should be covered and reversed near 131^17. ______ UPDATE (April 6, 3:57 p.m.): The low of Friday’s violent price swings was 131^21 — not quite close enough to have gotten you long easily. Although this could prove to be an important low for the short- to intermediate term, under the circumstances I’ll assume no subscribers were filled. _______ UPDATE (April 11, 1:03 a.m.): Next important stop on the way higher: 135^17. _______ UPDATE (April 20, 11:10 p.m. ET): Last week’s fleeting stab to 135^10 came within less than a quarter-point of my target — close enough for us to consider it fulfilled. It took the futures more than a month to get there, so we should expect this correction-or-worse to last for at least a week or so before bulls attempt to push T-Bonds to new recovery highs.