Tuesday, December 20, 2011

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

I'd be surprised if the next big rally doesn't come after late September's 1543.30 low has been broken, but we should be ready for one nonetheless.  Although there's no compelling, big-picture reason to try to get long at these levels via camouflage, the felicitous tedium of retracement rallies could provide us with some very low-risk spots to attempt it. For a precise idea of what I'm talking about, check out the annotated chart (inset), which shows two bullish patterns tied to a look-to-the-left external peak at 1611.40. (And yes, I know it is not a strictly-legit peak, since there is no stick-down low preceding it). Subtleties like the one shown, with a big-pattern impulse leg that has qualified as such by a single tick, are exactly what we should be looking for to get long.

The chart reproduced alongside yields a worst-case low of 1.2507 for the Euro over the near-  to intermediate-term.  The downtrend could breach that Hidden Support and go lower, of course, but it seems unlikely that this will occur without a tradable bounce from very near the pivot. That is not an exact number that can be used to bottom-fish with the usual penny-ante stop-loss, by the way, since it comes from coordinates taken from a composite chart. Still, our target should be close enough for government work if we want to bottom-fish with camouflage cover. More immediately, we should be look for ways to get short, presumably at the p midpoints and d targets of minor rallies. If there's any interest in doing so in the chat room, I'll put out some "live" numbers in real time.

No change. We 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.  We’re using a 52.13 downside target for now, but the Cubes would need to go lower before we think about taking off the position for a quick profit.  As noted here earlier, total risk is limited in theory to $20 plus commissions,  but we could make as much as $1200 if things go our way. Effectively, we have gotten 60-to-1 odds on the QQQs trading 50 or lower by January 20. ______ UPDATE:  The value of our position barely upticked over the five weeks we held it, since the Cubes, far from starting 2012 with a collapse years overdue, simply wafted higher. Our trading loss, not exactly staggering, was $20, but that shouldn't discourage us from making the same bet again and again and again, since one of these days stocks are going to fall and keep on going.

Someone in the chat room appears to have filled a bid down around 1196.50, a Hidden Pivot highlighted during Monday's impromptu online session. Although I'm not going to track the position because the trend is too well developed, perhaps we can try to get short when buyers run out of steam.  We haven't done much of this, mainly because it's been easier to nail swing lows that go against the trend in a presumptive bear market.  For starters, let's use the point 'X' of the downtrending pattern shown to get aboard. Entry will need to be via camouflage, though, since the implied theoretical risk here is about 2.50 points, or $125.  As I explained during yesterday morning's sessions, we want to "do" the trade in whatever time frame yields a downtrending abc pattern with no more than five ticks ($62) of entry risk from point 'X'.  I'll establish a tracking position for your further guidance if there's an entry signal that meets all of our criteria. _______ UPDATE (10:02 a.m. EST): Today's wicked upthrust has caught shorts with their pants down. The proximal cause of this 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 heat up -- to get legs, even.  Technically speaking, the short squeeze is bullishly impulsive on the hourly chart and 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’).

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. We’d held a long position in the March futures going into the weekend, and although the position showed a paper gain of $600 when we exited on a stop at 1210.75 Monday morning, we bailed out well off the overnight highs. This wouldn’t be the first time we got long with an ultra tight stop-loss using the Hidden Pivot “camouflage” technique, nor would it be the first time that the uptrend we boarded went nowhere.  Catching the occasional big wave is always our intention when we do “camo” trades, but given the choppy, go-nowhere, do-nothing price action in recent months, we’ve had to adjust our “long-term” horizon downward not to months, weeks, or days, but to hours. Santa’s Influence Nil Concerning Santa’s seasonal influence on Wall Street’s otherwise pointless, algorithm-driven histrionics, news from Europe has overshadowed so-so reports on holiday retail sales in the U.S. The last such report suggested that many shoppers had finished early this year and that there would not be much good news coming down the home stretch. Such “facts” seem impossible to determine, though, since it would require exit polls at the malls to say