Thursday, October 23, 2014

There was nervousness in the chat room about missing the next big rally. To avoid this, if the opportunity should arise, I'll suggest using camouflage to get long -- albeit not in the same size we would if buying at a 'D' correction target. A 'b-c' pullback from just above peak #3 would set up the trade, but please inquire in the chat room if you are not confident about how to proceed. Since we're trying to leg into vertical call spreads, we'll start with some cheapies for under 0.60. That could mean going as high as the 125 or 126 strike to open the position. The goal thereafter, presumably on a strong rally, would be to sell options two or three strikes higher for as much as we've paid for the long side of the position.  We'll start with four contracts, but I may suggest stepping up the size if the entry looks sufficiently promising. _______ UPDATE (10:33 a.m.): TLT went lower, so we did nothing. The ease with which sellers cracked the 120.03 midpoint support of the pattern shown implies more slippage to the 118.20 target.  If this vehicle gets there, it will be an excellent place to try bottom-fishing aggressively, legging into the long side of our intended vertical spread. Stay tuned. Pivoteers should also notice that a rally back up to p=120.03 would be a spec short.

The failure of Tuesday's rally to reach the modest, 1260.30 Hidden Pivot target we were using as a minimum upside objective is not exactly a sign of robust health. The target remains theoretically viable because the point 'C' low at 1232.00 with which it is associated is still intact. However, the hourly chart has swung bearishly impulsive as a result of the ratcheting, two-day sell-off from the recent high at 1255.60.  Short-term downside potential is to the 1232.30 target shown. If this Hidden Pivot support is easily breached, however, it would suggest more sellers are waiting in the wings. Alternatively, the futures would need to surpass 1246.30 without having first touched the 1239.30 midpoint support (see inset) to turn the hourly chart short-term bullish. _______ UPDATE (October 27, 8:01 p.m. EDT): I expect the next leg down to reach the 1216.40 Hidden Pivot support shown.  Alternatively, a print today at 1236.30 would give bulls a fighting chance. _______ UPDATE (October 29, 1:23 p.m.): 1202.10 is my new downside target -- a Hidden Pivot support identified during this morning's weekly tutorial session. _______ UPDATE: An 1125.00 target broached yesterday during my regular interview with Al Korelin should suffice to keep you out of trouble. I hadn't imagined the futures would get halfway there overnight.

Bears shouldn't break out the bubbly yet, since bulls were not exactly diving for cover yesterday; they just seemed a little fatigued after it became apparent around mid-session that there wasn't enough short-covering nervousness to move the broad averages higher.  That's understandable, considering the squeeze was in its fifth consecutive day. Now, we should look for DaBoyz to manipulate stocks lower in order to "discover" a price at which selling dries up. This is a dynamic process, since the news environment will be changing, and the selling could conceivably start to feed on itself if it shows any success. For the moment, however, given the precise bounce off  a 1919.75 Hidden Pivot support (see inset), short-term, technical signs are neutral. My gut feeling is that night owls will enjoy better success positioning from the short side nonetheless, but set an alert  just above the two numbered peaks, since that's where any rally would turn menacing.