Monday, April 7, 2014

Priceline collapsed without having reached a 1286.11 rally target I'd flagged. This implies that the nasty downtrend from early March's 1379 high could still have a ways to go. Most immediately, that implies a further fall to at least 1116.16, a Hidden Pivot support associated with the pattern shown (see inset). A rally to 1196.45 should be shorted via camouflage, but we will also try some tightly stopped bottom-fishing if and when 1116 is reached.

Although my tout for Friday anticipated the bull-trap opening, the actual head-fake fell three points shy of the 1895.50 pivot where I'd suggested getting short. The subsequent collapse came within two ticks of a 0.618 retracement of the rally begun on March 27 from 1834.00, but I doubt that this Fibonacci level will hold.  It was a speculative buy on Friday, although it would have been risky to carry the resulting, marginally profitable long position over the weekend. Fibonacci levels and Hidden Pivots aside, you should consider bottom-fishing today at the trendline, which, depending on the time of day, will come in anywhere between around 1841.75 and, toward the end of the session, 1843.00.

It's impossible to predict the headless-chicken antics we might see on the opening bell. However, my strong inclination would be to short any rally that reaches a clear p or D Hidden Pivot.  Just such a target is shown in the accompanying chart, and although its pedigree leaves something to be desired -- there are no external peaks to be seen -- I regard the 164.30 target shown good enough for government work. This mean you could try shorting there with a stop-loss of perhaps 4-6 ticks.  Once above the 164.53 peak, DIA would be bullishly impulsive. While that might ordinarily incline toward getting long, in this case I would be more tempted to try shorting at the p midpoint of whatever bullish pattern develops. ______ UPDATE: The uptrend shown turns out to have failed at the exact midpoint of the pattern shown. Unfortunately, this means the short had to have been initiated at the closing bell on Friday -- too risky for my taste.

Last week's marginal new record high generated a bullish impulse leg on the daily chart (see inset) before shares tanked on Friday.  Now, it will take a 'booster-stage' rally of at least 110 points from 16192 or higher for bulls to seize the reins. Alternatively, an uncorrected fall of about 300 points from here, to below 16126, would hint of serious weakness to come. My gut feeling is the that the broad averages will move sideways to lower this week, providing us with a possible bottom-fishing opportunity at the p or D Hidden Pivot of the corrective pattern.  More immediately, traders should view a rally Sunday night or Monday morning as a shorting opportunity. Stay tuned to the chat room if this interests you.

Think you could make it in business with a trillion dollar subsidy? That’s a very conservative estimate of what the banks can borrow each year at almost no cost, courtesy of Fed easing. Returning the favor, the banks plow most of the funny money into Treasury paper, stocks and bonds, then lend the crumbs that remain to the riff-raff at usurious rates that can exceed 20% -- a tad more than Frankie the Camel charges his customers.  What a great way to make money!  And yet, how do we account for this recent headline in The Wall Street Journal:  Bank Profits Are Looking Stressed – Slumps in Trading Revenue, Mortgage Business Are Expected to Weaken Quarterly Earnings Reports.  Can this be right?  Actually it’s even worse than it sounds, since, on the trading side of their shady business, banks have something going for them that’s even better than subsidies – i.e., the ability to control securities markets like a Big Six wheel on the carnival midway. No One Is Fooled Speaking as a former floor trader, I can attest that institutional trading desks seldom execute an order unless it affords them a fool-proof opportunity to front-run their own customers, and, as part of the process, to steal a little extra from each and every other party to the transaction. High frequency trading is just one of the ways they do this, scooping up shares nanoseconds ahead of you or I in order to sell them to us for a small fraction of a penny more than they paid. Michael Lewis is out with a book called Flash Boys that explains this in detail. Caught in flagrante delicto, Wall Street’s reaction is to deny everything.  In this they have been abetted by the usual morons and shills in the financial press,