Tuesday, September 30, 2014

We'll monitor this vehicle more closely for low-risk shorting opportunities in the days ahead. Let's warm up with an order to buy four Oct 10 169 puts if and when DIA gets within 0.04 of the 171.10 target shown. I estimate that the puts will be trading for around  0.75 then, but you can refine the bid as warranted by training on the bid/asked when DIA gets to 170.90.  We'll risk a theroretical $80 on this one, stopping ourselves out of the puts if they trade 0.20 below where bought.  ______ UPDATE (2:50 p.m.):  A dead-center bullseye here, since my tout -- sent out last night -- caught the high of today's fake-out rally exactly to-the-tick. If you got short as I'd suggested, please let me know in the chat room and I'll establish tracking guidance. _______ UPDATE (3:44 p.m.): A fill at 0.75 was reported (somewhat belatedly) in the chat room, so I'll now recommend shorting four Oct 10 167 puts for 0.60 against the four held. ______ UPDATE (4:04 p.m.): Some cheap fool was bidding 0.59 for the calls at the close. Let's offer them for 0.68 when they open Wednesday morning, assuming index futures haven't fallen by much overnight. If they have, adjust the offer accordingly.

E-Mini S&P 500 Futures Contract Technical Analysis: Bears blew a chance to sack stocks yesterday when the Bad Guys reversed a 137 point plunge in the early going to close the Dow off a measly 42 points. Recently, it's seemed all too easy for DaBoyz to manipulate the broad averages so that they almost never experience three down days in a row.  One way they do this is to pull their bids overnight and let stocks fall on gaseous volume. The effect is to dry up sellers so that stocks can be short-squeezed to new highs without much effort or bullish buying. However, we should infer that this little trick is getting old when it takes a 137-point drop to set the trap. Moreover, although shorts remain as easy to spook as a sorority girl at a sceance, they weren't so panicky yesterday that stocks were able to close up on the day. One trader who re-shorted the E-Mini S&P yesterday after getting bucked off the horse by Friday's strong rally suggested that the only thing keeping stocks aloft right now is end-of-month portfolio-squaring. This explanation feels right to me, but we won't know for sure until October is under way.  In the meantime, I'd recommend cautious shorting that follows our Hidden Pivot rules. Generally speaking, this means initiating shorts in this vehicle at minor rally targets whenever entry risk can be held to a theoretical five ticks or less.