Tuesday, June 12, 2012

With virtually all intermediate-term cycles pointing lower, we'll look for defensive plays. The p midpoint resistance shown (157.36) is a good place to start, but this trade will require a 'camouflage' approach. (Note: In the future, I plan to offer straight trades --i.e., without camouflage -- at 'D' targets if the opportunity should arise.)  Accordingly, using the three-minute chart, I'll recommend buying a multiple of four July 150 puts on the first downtrending 'x' trigger following GLD's initial encounter with 157.36 on the way up.  Alternatively, for those who favor a simpler approach, you can short 400 shares at 157.33, stop 157.41.  _______ UPDATE (June 13, 7:18 p.m. EDT): Yesterday's gap-up opening stopped out shorts from 157.33 for a theoretical loss of $32 on 400 shares (plus commissions). Shorting opportunities on the three-minute chart remain viable nonetheless, although I could find no appealing ones myself in the forest of mostly trendless bars (see inset, a fresh chart) that followed the opening. If you are able to get short using my instructions, please let me know in the chat room so that I can establish a tracking position for your further guidance.

We should allow our eyes to get used to the kind of subtleties that will make for profitable shorts.  Ponder the one I've reproduced herein -- an unspectacular, downtrending A-B that exceeded the relevant 'external' low by just four cents. This pattern all but guaranteed a partial exit at p, and my guess is that it will reach 'D' before the dawn. Why not try to make a few bucks on the long side to cushion the stop the next time we get short?  Let's try it with a 61.57 bid (against a 61.55 D target) for 400 shares, stop 61.48.  

I suspect that the mini-index futures are even weaker than they look. For tradable details, see the current tout for the September E-Mini S&P, which has breached a prior low in after-hours trading and not rallied much since.

Still-lower prices appear likely, since yesterday's plunge not only exceeded the clear 'D' target shown, it has also impulsed beneath Friday's low in after-hours trading.  Add in the fact that the obligatory running of the stops following the breach of the low is not producing much of a rally, and one could infer that the underlying weakness is profound.  Pivoteers are encouraged to short -- using a microtight stop-loss --  the 'd' target of  any rally that plays out well on the 5-minute chart; or to short a 'p' using camouflage. _______ UPDATE (11:30 a.m. EDT): An hour into the session, in the space of two 30-minute bars, the futures have rallied sharply, impelled by who-knows-what news. The so-far high is 1314.00, but it'll take 1319.50 -- equivalent  to a Dow rally of about 160 points from this morning's lows -- to turn the hourly chart impulsively bullish. To trade this already overextended move via camouflage, you'll need to zoom all the way down to the two-minute chart -- the first place where single-bar highs and lows are available --  initiating via a timed buy-stop.

We speculated here yesterday that the latest eurobailout, a $125 billion package for Spain’s zombified banks, would prove too chintzy to ignite much of a celebration on Wall Street. As it turned out, that was putting it mildly. Once the OPM-mongering dolts who sent stocks soaring in Europe and Asia had finished jerking their knees, the party lasted for all of about 20 seconds in U.S. markets -- as much time as it took for the pros to fleece short-covering bears Sunday night with a vicious gap-up opening in the index futures. The Mini-Dow shot up the equivalent of 210 points on the first bar, putting a squeeze on bears that is likely to make them think twice about going home on a Friday with open positions. The 12715 peak was as high as the electronically traded Dow ever got in this run-up; moments later, it began a 407-plunge that continued until the closing bell. Yikes! Keep in mind that buyers covering short positions gone awry are arguably the best friends (other than a promiscuous central bank) that Wall Street has any more, since they are the only buyers left with a reason to bid up stocks aggressively. However, the roughing up they received on Monday will only add to their skittishness about betting the “Don’t Pass” line. At the very least, the 12700 area where they got sandbagged will impose a leaden layer of supply on any attempt DaBoyz make to goose the broad averages new highs. Using QQQs Puts to Get Short From a purely technical standpoint, however, we are not ready to write off the bull market entirely. Notice in the chart above that Sunday night’s head-fake followed a thrust that had already exceeded a key peak at 13137 recorded five years ago.  The rally was therefore