The Dollar Index looks set to pop above 80, an event that would have dramatic implications for the dollar carry-trade. I will write at greater length about this later in the week, but for now you should check out the DXY tout and the chart that accompanies it, since it shows how all hell might be about to break loose in the form of a runaway dollar.
From the monthly archives:
December 2011
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We hold two Jan 54 puts and two Jan 53 puts whose cost basis has been profit-adjusted downward to, respectively, 0.76 and 0.57. I’ve suggested shorting December 54 and 53 monthly puts against them for the same price, yielding risk-free calendar spreads, and that’s what we will do officially. We may try something else if the selloff begun yesterday stalls, though, since it will take a pretty nasty downdraft to get our short offer filled.
However, you might also consider emulating a chat-roomer who reported legging into $2 vertical bear spreads by shorting January 52 puts against the January 54 puts he already held. Because he did so for a net credit, the position will make money regardless of whether the QQQs rise or fall. However, it will also give him a risk-free bear play into the New Year, with a $200 profit assured if the Cubes fall below 52 by January expiration. For now, my minimum downside target is the 54.87 midpoint of the pattern shown. You can leverage this number as you see fit, but my hunch is that it will foster a tradable bounce from within no more than four ticks of 54.87.
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.
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Gold and Silver were getting pounded in the middle of the night, although index futures were down only enough to suggest that Da Dirtballs were shaking out sellers. Their by-now-familiar trick is to make certain that the contracts they’ve stolen from widows and pensioners in the wee hours can be short-squeezed higher with almost no resistance before the opening bell. The (small) gamble is that sunrise will not bring word of Europe’s demise.
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The bad guys had gold on the run Sunday night, presumably bound for the 1672.30 downside target of the pattern shown. It would take nothing less than a pop to 1733.00 overnight or Monday to put bulls back on the offensive. The bearish target can be bottom-fished — preferably with camouflage, but if you want to take the easy (but somewhat riskier) path, because the pattern has such gnarly appeal, you can bid 1672.40 with a 0.50-point stop-loss. Nimble traders can also look for a turn at 1685.70, the midpoint support of the lesser pattern shown with purple ABC coordinates. Keep in mind that ‘camo’ shorts would be aligned with some even larger downtrends that point to either 1638.00 or 1633.10. _______ UPDATE (11:43 a.m. EST): Bottom-fishing at 1672.30 could have produced a small profit, but probably no worse than a scratch when the futures subsequently headed lower. There was a 12-minute bounce of $3.40 from 1672.60 at 8:42 a.m. (3-min); and a $3.80 bounce from 1672.00 that lasted just a few minutes. Since we were using an initial stop-loss of 50 cents, the bounce we’d anticipated need only have been $1.50 to give us a reason to take a partial profit on half the position.
Be Very Afraid of Europe’s ‘Re-Hypothecators’
by Rick Ackerman on December 13, 2011 12:01 am GMT · 123 comments
[The commentary below elicited quite a response, so I'm letting it run for a second day. Wednesday's commentary will feature two very important trading tips for permabears who have been trying for years without success to short the elusive Mother of All Tops. If you're interested in learning the "parlor trick" that we used on Friday to get short the QQQs ourselves within a hair of the intraday high, click here. And if you'd like to have these daily commentaries delivered to your e-mail box free of charge, as will as free access for a week to all of Rick's Picks services and feratures, click here. RA]
Who’d have believed that the word “hypothecation” would grab the financial world’s shakers and movers by the balls last week, whirl them round-and-round, then dash their cynical pretenses of “saving” Europe against a stone wall? Click here to read the article on this topic at ZeroHedge if you haven’t done so already. And then send it to everyone you know. We did, with a warning that the collapse of the banking system is no longer merely possible or likely, but unavoidable. The article takes pains to explain why in terms that even the layman can understand. It will undoubtedly have created quite a stir not only among the broad readership of web sites that linked it, but among those charged with the task of further delaying Europe’s financial collapse. The spinmeisters and policymakers have been doing their utmost to obscure the details of the supposed rescue effort, since the better those efforts are understood, the more absurd they become. » Read the full article