Friday, June 14, 2013

The bounce off Thursday's lows points most immediately to the 1394.30 target shown, although we should be wary of the fact that bulls initiating a trade at the first signaled 'x' would have been stopped out. Regardless, if and when buyers get second wind, pushing this vehicle past the 1388.10 midpoint, we should infer that it's on its way to the target. Thereafter, as always, an easy move through 1394.30 would portend another leg up, presumably after a correction. ______ UPDATE (12:17 p.m. EDT):  After pushing past the midpoint, the futures were unable to parlay this success into what should have been an easy move to at least 1394.30.  This is disappointing, to say the least, and implies that today's $13 rally was just more screw-the-pooch price action.

The futures turned maniacally higher from a bottom fully 10 points above our target, telegraphing the take-no-prisoners short-squeeze that was to follow.  DaScuzzballs were allowing only a shallow pullback Thursday night -- one that was not bearishly impulsive even on the lesser charts -- hinting that they will show no mercy when stocks open Friday morning.  If you're looking for a risk-averse way to board, I'd suggest 'camo' patterns on charts of 5-minute degree or less.  As of around 2:43 a.m. EDT, there was an excellent opportunity thereof for night owls. _______ UPDATE (11:51 a.m. EDT):  How odd.  On the 3-minute chart, the futures completed only one minor abcd rally overnight, and it went nowhere. Even on the  opening, with the obligatory short-squeeze to begin the day, the futures could muster no more than bull-trap spike to 1640.75.  The subsequent downtrend, still in progress, points to 1620.75, subject to the destruction of a midpoint support at 1627.00 that was precisely tested just moments ago.

The vertical bull spreads that subscribers hold in this stock are virtually riskless, since they were legged on for a net CREDIT of 0.01.  This means that if Goldman shares were to fall to zero we would have no loss, even after commissions.  Specifically, we hold the July 195-200 call spread 32 times -- a position that could produce a gain for us of $16,000 if Goldman is trading above $200 when the options expire on July 19. What are the chances that this gambit will pay off at maximum odds? The chart shows that Goldman would need to put on a powerful burst of speed to deliver on its potential.  A move to at least 180.67 looks like an odds-on bet a this point, and if the stock were to get there before July we'd be tempted to tell you to cash out of the position for a profit of perhaps $3000-$4000. That's because GS would probably have to noodle around for a week or two to develop enough thrust for the additional $20 run-up it would take to push our spread in-the-money.  For now, let's cross our fingers and hope that we are challenged with such a decision.  Think you can't do this stuff?  Click here and let us show you how. ______ UPDATE (July 8):  The stock is trading about where it was two months ago, making the chance of a payoff extremely remote. However, since our spread was legged on for a small credit, we'll come away with no loss even after taking commissions into account.

The chart below was posted in the chat room yesterday by a Rick’s Picks subscriber evidently at the point of despair over the stock market’s inability to muster a sell-off worthy of the name. The three-day downtrend reversed by yesterday’s swoon is a case in point.  This was the first time this year that the Dow average had fallen for three consecutive sessions. And yet, the drop from high to low was a mere 250 points -- barely enough to placate beleaguered permabears, let alone satisfy them.  And although some of them may have experienced a little tingle Wednesday night when index futures were down the equivalent of an additional 250 Dow points, the exhilaration was short-lived, since DaBoyz engineered a low at around 2:30 a.m. Eastern that served as a launching pad for the ballistic rebound that was to hold sway for the next 14 hours. The Dow finished the day up 180 points -- a roller coaster ride of 430 points. While few would challenge the assertion that the stock market has become a sleazy midway game rigged for the benefit of a relative handful of shadowy, high-tech arse bandits, it is not the so-called algo-traders who are doing most of the manipulating. While it is indeed possible for these thimble-riggers to push stocks higher or lower via quote-stuffing and other strategies developed by digital trading's netherworld (aka “dark pools”), the most significant rallies have come, as always, from old-fashioned short-covering. As we have pointed out here many times before, mere buying by bulls will never be powerful enough to push stocks through heavy supply to new record highs.  But short-covering is easily up to the task, since it is impelled by margin calls on traders who are getting eaten alive by every uptick. To set them stampeding,