Wednesday, June 25, 2014

In retrospect, the 169.64 target noted a while back was a good place for bears to lay 'em out, since DIA has yet to exceed 169.58, the all-time high. Now, however, we'll be looking to get slightly short, effectively straddling the bullish bet we made Tuesday in AMZN.  Accordingly, if you hold calls in AMZN, you should try to buy 166-strike puts expiring on July 3 for 0.42 or better.  I would suggest putting a bid in at the price on the opening only, since it would probably get filled if the broad averages open with a weak rally.  If not, I'll update guidance in the chat room.  Remember, this play is only for those who are long in AMZN. (Note: We tried to buy the puts on the close with DIA in a very slight bounce, but the clock ran out on us.)  _______ UPDATE (June 26, 12:12 p.m.): Subscribers reported buying July 3 puts at the 166 strike for as little as 0.33, but I'll track two @ 0.40 to allow for less-opportune fills. In straddle fashion, they go against call options acquired in AMZN.  One side of the position or the other could produce a nice profit, but only if stocks get a little wild over the next 2-3 days.

Nearly everything we trade or monitor reversed sharply yesterday, although gold futures fared somewhat better.  The August contract settled at 1321.30, up $3.00 on the day, after trading as high as 1326.60 earlier.  What might this portend, technically speaking? Actually, the weak selloff could be seen as constructive, since it added an unthreatening bar to a shallow consolidation pattern that has traced out over the last three days. We were particularly bullish coming in, since an ETF vehicle that traders use to effectively go short in gold had just broken down. It symbol is GLL, and because it looks like it has quite a fall ahead of it, the implication is that gold itself is about to embark on a sustained rally. We can only hope this doesn't occur because geopolitical tensions have taken a turn for the worse, since the threats to world peace that already exist, such as they are, are potentially catastrophic. In any event, traders eager to ride the next upthrust in bullion should do their buying following the retracement of any small rally that has surpassed at least two prior peaks on the chart shown. I've sketched this hypothetically (see inset), and it is what we refer to a 'camouflage' trade, which is intended to reduce entry risk to a minimum. If you're interested in how it's done, click here for information concerning the upcoming Hidden Pivot Webinar.  _______ UPDATE (11:45 p.m.): A wicked but fleeting downdraft Tuesday night has taken this vehicle down to a so-far low of 1305.40, equating to a $16 drop. My hunch is that a second leg will follow tonight, so I've changed the chart to one that may be useful for night owls to bottom-fish, or for technicians to assess the likelihood of more damage.  We can usually gauge

I was only half-kidding in the Rick's Picks chat room when I raised the possibility that Tuesday's fleeting high could prove to be the last gasp of the bull market begun in 2009.  If so, considering the egregious financial excesses that produced it, our children, their children and even their children's children might not live to see it exceeded. One reason I suspect it could be a top of at least intermediate importance is that the E-Mini S&Ps came within two points of achieving an important rally target at 1962.50 that I'd 'whispered' in that chat room a while back so as not to jinx it. Naturally, I was waiting to squeeze the last millimeter of upside from the move before shorting it, and so the decline from just shy of the target caught me with my pants down and shoes untied. Caught more than a few others, too, judging from the punitive slope of the selloff that ensued.  We'll know first thing Wednesday morning how hard bulls have prayed overnight for a bounce that they can sell, since, if there's a God, there's no prayer He so delights in ignoring as that one. Technically speaking, and as someone noted in the chat room, when stocks rally above the previous day's high and then close beneath that day's low, it usually means the downtrend will continue for at least a few days. Janet Yellen could conceivably say something to change the outcome, but our view is that the economic world would be much better off if everyone simply tuned her out -- better yet, drove a stake through her heart.