Monday, March 19, 2012

Buyers made scant progress toward a minor benchmark I'd flagged here Friday, implying that the burden of proof remains with bulls. If they fail to get traction, and soon, look for the downtrend to continue to at least 1623.00, or to 1588.50 if any lower. Both targets have already been noted here, and either could be bottom-fished with 'camouflage' or a tight stop-loss. Alternatively, bulls' first flicker of life would come today on a print at 1673.00, just above a small peak recorded  last Wednesday on the way down. It is visible on charts of 30-minute degree or less.

It doesn't take a rocket scientist to discern that HUI is likely to fall substantially to fulfill an all-too-clear 'D' target at 442.13.  This was practically ensured when sellers gapped HUI through the pattern's midpoint support late last week. Bulls will have a chance to get back in the game as always, but we should require nothing less of them this week than a print exceeding 523.87, a 'look-to-the-left' peak 'along the wall' from March 2 that is visible on the 60-minute chart. Would you like to learn how we use the ‘camouflage’ trading technique to significantly reduce entry risk? Click here for details.

I've drum-rolled a precise Hidden Pivot target to short in the E-Mini S&P, but for those who would prefer to use equity options, there's a detailed put-buying strategy in Monday's QQQ tout.

A Hidden Pivot target at 68.65 is roughly equivalent (though hardly equal) to the rally target in the June E-Mini S&P that I've suggested shorting. Let's try it in this vehicle by buying four May 68 (monthly) puts if and when DaCubes get within 0.07 points of the target. A price of 1.70 would be about right if implied volatilities don't change much during the ascent.  In practice, however, in order to get a fair price, I'll suggest monitoring the bid/asked for the puts once QQQ gets above 68.40.  A final note: Stop yourself out of the position if the puts trade  for 0.20 less than you've paid for them. _____ UPDATE: We'll put this one aside for now, since the wait has grown boring and distracting.

The potentially important target that I alluded to in today's commentary should be familiar to subscribers: 1412.75.  The chart, too, should look familiar, although it is even more compelling visually following  last week's extension of the C-D rally leg.  We'll be looking to get short near the target via camouflage, using a chart of 5-minute degree or less, but those of you who are eager to get aboard but unfamiliar with the technique can simply short 1412.50, stop 1413.25.  The latter strategy will assume a single-contract entry, but I'll track four contracts if there's an obvious fill on a 'camo' trade.

Late Sunday night, the Mini-S&Ps were butting up against a minor “Hidden Pivot” resistance at 1401.25 whose breach would suggest that yet another bullish surge lies immediately ahead. We’ve gotten so accustomed to seeing bears scramble for cover ahead of Monday morning’s opening that, in contrarian fashion, we’ve waxed increasingly cautious whenever it happens. In the current context, that means paying close attention to an E-Mini S&P  rally target not far above that has the potential to stop bulls dead in their tracks. [Click here for free access to the exact number.]  Notice that we are not guaranteeing that the Mother of All Bear Rallies is about to end. To the contrary, and as many of you will have surmised long ago, the odds will always be against those who would attempt to predict exactly when a rally that has been running more or less non-stop for years will seven-out. Even so, hope springs eternal that one of these days, U.S. stocks will lurch into realignment with darker realities rather than with the shameless propaganda requirements of an election year. In the meantime, please don’t get the idea that this kind of wishful thinking on our part is just sour grapes.  In fact, we were long and bullish on the E-Mini S&Ps as recently as last week after a trade triggered during one of our regular weekly online tutorial sessions. Over the short period we held the position, the futures didn’t get very far.  However, a modest rally allowed us to exit with a small paper profit, and we planned – still plan --- to reverse ourselves via a short if the futures hit the “magic number” alluded to above.  That number, as noted, is a “Hidden Pivot” as determined by our proprietary forecasting method, and it looks sufficiently compelling