July 2014

Lower targets given here yesterday remain viable, but a new one at 1285.50 has come into focus as a result of yesterday's headless-chicken histrionics.  Night owls can try to grab a piece of the downside by shorting near the 1296.40 midpoint pivot with a tight stop. But if you miss the trade there will be an opportunity  to bottom-fish via a 1285.60 bid and the tightest stop-loss you can handle.  _______ UPDATE (8:48 a.m. EDT): This one worked pretty nicely, since the futures swooned to a 1285.90 low just 15 minutes ago, then bounced to a so-far recovery high at 1291.20.  As of 9:40, there were no reports in the chat room of anyone having used the target to get long, although one sub evidently was short profitaly overnight.

You can feel it in your bones that the bull market begun in 2009 is in the throes of a violent death. But how do you get short -- and stay short -- when hysterical spasms, short-squeezes and swoons continue to occur almost daily?  I discussed this with my trading partner yesterday and we decided the best way to handle the chop is to try to buy the bottom of swoons so that we can rack up enough profits on the rallies to cushion each new short bet.  Trouble is, our 1954.50 bid for E-Mini S&P contracts yesterday fell two points shy of the day's swoon low, and so the rally took off without either of us aboard.  A friend who trades aggressively but whose main business is real estate development said he was simply staying short and that he would gut it out if stocks get squeezed to new highs. While that may yet prove to be the best strategy, it can be unnerving to watch the Dow swing 200-300 points or more against you while you're waiting for The Big One.

Opportunistic as ever, Day Boyz have been using the opening bars of each session to get as much boost as possible from short covering.  It's hard not to notice that they've been meeting with diminishing success with each new day. Unless there is ostensibly bullish news to greet the day, their rinse-and-repeat tactic may not even get off the launcher today. When was the last time the market opened lower and kept going? I don't recall, but it would certainly be a refreshing change.  ________ UPDATE (10:27 a.m.)  And now we have yet one more session with a (likely) intraday high occurring on the opening bar. Considering the news -- a fraudulent 4% GDP growth -- the short squeeze was the feeblest we've seen so far.

Switching to the December contract, I'll suggest using the 1278.70 correction target shown if the selling should breach the 1296.60 midpoint support. Both of these Hidden Pivots looks enticing for bottom-fishing, since neither coincides with structural support from a prior low. Accordingly, you could use a stop-loss as tight as four ticks below a bid at either target.

Slippage beneath the red line (p) late in Tuesday's session implies the futures will now grope their way down to at least 1954.50 in search of traction.  This target is a pretty one, and I'd have no qualms about telling you to bottom-fish there with a three-tick stop-loss if it were hit intraday. However, because the target is being disseminated overnight and therefore will not be as fresh and mysterious when the futures get there, I'll advise a cautious approach that suits your style if you plan to bottom-fish. As always, the most logical short would be from p if the retracement rally now in progress gets there.  Trading concerns aside, if the downtrend smashes the support it would indicate that the selling is waxing. _______ UPDATE (2:18 p.m.): Today's hysterical, obligatory short-squeeze has come from 1956.50, cheating us out of an easy trade from the target I'd identified.  There'll be other opportunities, for sure.  However, because the turn has come from a low that didn't quite reach a clear correction target, bears had better give the rally wide berth.

Bond prices were diving when the  tutorial session began, ostensibly because of a fraudulent report that GDP had grown by 4% in the last quarter.  The market’s unwarranted reaction to this disinformation afforded us an unusual opportunity to buy call spreads in TLT at fire sale prices.  This lesson contains some of the most detailed instructions I’ve ever presented for “working” an options order.  As you will discover, the task does NOT require a sophisticated understanding of puts and calls -- only a focus on bids and offers for a couple of TLT calls tied to a calendar spread that deserved to be bought extremely aggressively.

The stock market, drawing on the collective wisdom of tens of millions of investors, is supposedly all-seeing and all-knowing. If so, only a mere handful of them seem to have known that business was improving at Twitter. The stock took a 36% leap after the close on Tuesday, trading as high as 52.48, after strong earnings were reported in a conference call.  I say that a handful saw it coming because volume in some out-of-the-money TWTR calls was suspiciously huge on Tuesday, even if the stock didn't move that much.  We'll leave that for the regulators to sort out, since they apear to have mastered the art of catching "insiders" by following paper trails that practically glow in the dark. As for TWTR, it's already trading $4 above the highest target I could have predicted for it over the short-term.  Since the rally is 99% short-squeeze and 1% bullish buying, there's no telling how high it might go. The earnings news was very good, although not spectacular, but what do I know?  I have yet to figured out how the company makes its money when, say, a million followers tune to Justin Bieber, down in his cups at 3 a.m.

Somewhat beneath the old, 17622 target I've been using for a year to keep myself honest no matter how I felt about the market, there was another Hidden Pivot worth remembering at 17209. It is shown in the chart, and it displays with sufficient clarity that we should perhaps be vexed by its failure to work perfectly. Still, the 58-point shortfall amounts to just 0.3% percent -- close enough, probably, for the target to be considered fulfilled.  Moreover, need we remind ourselves that it is in the nature of a bull market about to fail that its final gasp should fall just shy of a major Hidden Pivot rally target?  So there you have it -- the case, if not for an incipient bear market, then at least a good reason to take each and every minor, downtrending abc seriously from here on out. And so we shall, at least until such time as 17209 is decisively exceeded, putting 17622 in our crosshairs.

Yesterday's meaningless swoon left numerous 'working' touts unchanged. If the broad averages are now about to head into new record territory, as we have come to expect, we have a dandy rally target in the Diamonds (DIA) to keep us long for the ride; and then to get us short because, well, because we can.  Of course, we're almost guaranteed to be wrong when we keep zeroing in on potential Mothers of All Tops. But keep in mind that our last such "mistake" held a profit of as much as $1200 per E-Mini S& contract for those who used the 1984.25 rally aggressively and then covered the short yesterday morning.