Monday, November 19, 2012

The Dollar Index is sneaking up on two 'external' peaks that, if easily surpassed, would provide strong evidence of a major rally in the offing.  Check out the chart accompanying today's DXY tout for further details.

On the daily chart, the impulse leg begun on Halloween is still uncorrected. Now, it is but a distance to the two 'external' peaks shown (see inset), and a leap that surpasses both without a pullback would offer strong evidence that this rally is only just getting off the launcher.  I've set a screen alert, so stay tuned.

Hidden Pivots aside, it looked like the whole world saw the turn coming from somewhere near $500. The price to be paid for a bounce from a too-obvious place is usually a re-test of the low. In any case, since we don't favor the crystal-ball approach, we'll watch and wait. I would bet heavily against Apple's making new record highs any time soon.  However, if this presumptive bear rally is headed high enough to trap a bunch of bulls, in getting off the launching pad it should be able to take out at least two of the numbered peaks labeled in the chart without a b-c pullback. _______ UPDATE (11:52 a.m. EST):  No stock is more important in determining year-end bonuses on Wall Street than this one, so consider today's take-no-prisoners short squeeze a shot across the bow. However, because Apple's product cycle will be dead till perhaps late next summer, and because the U.S. economy is edging toward the Mother of All Recessions,  don't expect these sleazeballs to lift this stock anywhere close to new all-time highs.

I'm tracking 24 Mar 30 calls acquired for an average 0.375.  Continue to offer 24 March 33 calls short against them for 0.50.  If successful, we'll have legged into a vertical bull spread that cannot lose. The best we could do would be to make $7500 on the position if Facebook is trading $33 or higher come March expiration. And the worst? That would be with the stock below $30, which would still produce a trading gain of $300.  The stock, meanwhile, looks bound for the 25.36 target of the pattern shown, having blown through its 'p' midpoint sibling at 22.12 on Friday. _______ UPDATE (11:15 a.m. EST):  There are 7 billion people on the planet, but when Facebook gapped higher on this morning's opening, evidently not a one of them was bidding for March 33 calls.  The options just sat there as a result, and so we'll continue to offer them short, hoping for a modicum of interest if the stock continues higher as I expect. _______ UPDATE (November 23, 1::04 p.m. EST):  We caught a gust of wind on the opening -- a head-fake that allowed us to short the calls for 0.50 before they topped at 0.55 and the stock receded into negative territory.  As noted above, this spread can't lose. The absolute worst we can do is come away with a $300 profit if the stock collapses. However, we stand to make as much as $2400 a point, up to $7500, if the stock is above $30 come March.  Incidentally, the calls themselves had a pattern that projected a top of at least short-term importance at 0.58.

"Culture changes policy; policy changes culture; and so the wheel of history turns," writes Myron Magnet in City Journal. "This is one of those moments when you can see it move. America’s traditional culture of self-reliant striving, of taming the wilderness, of limiting government from interfering with our own pursuit of happiness as we individually define it threatens to give way to a belief that our past and its values, from the heroic Founding onward, is a record of folly, vice, and misery, just as the British came to feel shame at their magnificent history." For the rest of the essay, click here.