Friday, December 14, 2012

Shorting an E-Mini Top in Real Time

– Posted in: Tutorials

This session featured the epiphany of a hitherto unrecognized E-Mini S&P target at 1337.75. There were several ways to get short, but as you will see, the decision we made hinged as much on guts as on coldly mechanical reasoning. Incidentally, two days later the trade was solidly in-the-black. At least one student who attended the class ‘did’ the trade, which he shared in the chat room in a timely way.

Short-Squeeze Bait

– Posted in: Free Rick's Picks

It's shortly after 3 a.m. EST and index futures are trading moderately higher, with the E-Mini S&Ps up the equivalent of about 50 Dow points.  This is short-squeeze bait if there's bullish news to greet the day in New York; however, if the news turns out to be excruciatingly boring, as it so often is, expect DaBoyz to ease the broad averages back down to unchanged, there to wait for a better opportunity to goose stocks past whatever supply may have accumulated since the last goosing.

ESZ12 – December E-Mini S&P (Last:1421.00)

– Posted in: Current Touts Free Rick's Picks

It's still too early to know whether we caught an important top with the 1337.75 target discovered during Wednesday's tutorial session, but it's clear enough already that we caught a tradable top. Price action was too erratic yesterday to produce a useful target for Friday, however, and a short-squeeze at the  close made it even tougher. It was attributed to a supposed invitation, Obama to Boehner, to talk about the budget.  The kick-the-can agreement that could come at any time will surely be used to short-squeeze the market yet again, even though whatever agreement comes is not likely to help the economy or stocks in the long, intermediate or short term.

Fed Losing Its Grip on Our Expectations

– Posted in: Commentary for the Week of March 8 Free

The institutional crazies, village idiots and knee-jerk opportunists who bought shares yesterday following a Fed announcement of yet more monetization seem not to have been paying attention, at least initially, to the nasty sell-off in T-Bonds.  Well before yesterday, any sentient being would have surmised that easing’s impact on the economy had reached the point of diminishing returns. With administered rates pegged at zero and mortgage loans near historical lows, how much more boost are we to expect from yet another gaseous effusion of bank-system credit?  Most of it is going unused anyway, other than by banks for the purpose of “buying” – you got it! –  Treasury paper. Contemplating this stupid shell game probably gets a faux Keynesian like Krugman hard, but sage T-Bond traders evidently were having none of it. As a backdrop, the Fed has been buying $45 billion of T-bonds each month, but offsetting it by selling a like amount of short-term Treasurys.  With yesterday’s announcement, the central bank ditched the offset, clearing the way for an increase in the Fed’s portfolio of “assets” above the current level of $2.861 trillion.  This latest twist in the soon-to-expire, dumber-than-dumb Operation Twist got a big thumbs-down from the bond traders, who drove futures prices sharply lower. Stocks, for their part, relapsed after the obligatory, news-driven short-squeeze, demonstrating that although the Fed may be capable of managing inflation expectations, its ability do so is no longer to be reckoned in months or weeks, but in minutes. Bullish on T-Bonds Despite the long bond’s plunge, we remain bullish on it down to 2% -- but not because of the Fed’s insatiable appetite for auction paper. As we saw yesterday, the promise of more easing has become a short-term negative for bonds. However, we expect the effect to be overshadowed, at