Friday, April 11, 2014

Index futures are actually up slightly Thursday night -- a reminder that even when Armageddon arrives there will still be short-covering bids to keep stocks buoyant.  My immediate price targets for the Industrial Average and the S&Ps imply that there will be at least a moderate follow-through to yesterday's selloff, with the Dow falling perhaps 170-200 points at today's lows.  Whatever rally ensues will be a short sale, I should think, but we shouldn't expect to be able to accomplish this comfortably.

Although permabears might sometimes wish on a thieving, forever-scheming Wall Street the kind of pain that was visited on Mel Gibson's William Wallace character at the end of Braveheart,  yesterday's  267-point decline brought satisfaction enough for now, especially since it looks like sellers are not quite finished.  Expect the Dow to fall at least another 166 points, to the 16004 target shown. That might not be the end of it, but it would still be an excellent place to try bottom-fishing, especially if you've been short for any part of the ride south.  I've provided  more-specific guidance for this in today's DIA tout, so check it out if you're eager to mix it up with the crazies today.  If you don't subscriber but would like a free peak (no credit card needed), along with access to the Rick's Picks chat room, click here.

June Gold finally passed all of my small tests yesterday and now looks primed for a thrust to at least 1354.00, the midpoint Hidden Pivot resistance of the bullish pattern shown. However, we shouldn't rule out the possibility that the corrective abc that I've labeled in purple will run its course before the next big rally.  The implication is that a pullback to the midpoint Hidden Pivot of the pattern would be a back-up-the-truck number where we could buy aggressively with a tight stop. The actual number is 1292.00, and it will remain viable as long as the point 'c' high at  1324.90 is not exceeded first.

I tend to be uncomfortable when using a target as obvious as the one shown. However, if you accept that Mr Market is going to try to screw with your head as he carves out a bottom somewhere near the 159.80 pivot (note: The Devil himself could not entirely avoid a Hidden Pivot as clear as this one), then by all means give bottom-fishing a whirl. My suggestion is to use call options that expire today, perhaps centered on the 161.00 or 161.50 strike.  To further guide you, if DIA bottoms at the target early in the session, you should try to buy out-of-the-moneys that you think have a chance of finishing at- or in-the-money and which can be had for 1.00 or less.

Now wasn't that refreshing! I put out an 1805.75 target intraday, implying a further decline in the Dow of at least 200 points awaits.  I suspect this target will be achieved in one fell swoop on the opening bar, but that shouldn't preclude getting short ahead of the move. In fact, apparent short-covering has lifted this erstwhile cinder block three points in after-hours trading, implying that there are yet a few bears out there who can't get used to the idea of letting their profits run. Their understandable yellow streak could be our gain, however, since it has presented an opportunity for night owls to get short on...well, if not strength, than on an hour or two's worth of delicately manipulated buoyancy.  If you are fortunate enough to be short when the target is reached, I'd suggesting reversing the position and going long, using a a portion of your gains to cushion a generous stop-loss. If you are simply bottom-fishing to open a position, however, you should use the 'camouflage' technique, since the target may be too well-advertised already to favor a stress-free entry.