Thursday, November 13, 2014

The futures obviously have our longstanding rally target at 2037.50 on their tiny, evil brain, since they’ve been diddling this Hidden Pivot resistance for nearly a week. The S&Ps could plunge at any moment, of course, tired of the game. But the tedious price action feels more like accumulation to me, and so I’ll stick with the 2055.25 target shown.  It looks too, too pretty not to work -- meaning, in theory, that: 1) it WILL be reached (if you’re keen on getting long, don't be afraid); and 2) it looks very likely to produce a precisely short-able top. Take a free trial subscription that will allow you to access not only the touts, bulletins, updates and impromptu trading webinars during market hours, but a 24/7 chat room that draws veteran traders from around the world.

A rally target at 205.71 is equivalent to the one I've flagged in DIA to get short. Options on this vehicle are far more liquid, however, and so you might want to train your firepower on some Nov 22 204 puts, buying eight of them when SPY gets within 0.03 to 0.04 cents of the target. My (very) rough guess is that the puts will be trading for around 0.62 cents, but you should adjust your bid according to actual market conditions.  Watch the bid/asked spread for the puts as SPY gets closer to 205.71, and try to position your bid in the middle of the spread when it comes time to act.  If you're filled, tie the puts to a stop-loss 0.12 below where you've bought them. As always, if you see a good opportunity to get long for the presumptive rally, any profits booked thereof can be used to increase the position size of your short, or to widen the stop-loss. ______ UPDATE (11:15 a.m. EST): We used a lesser target at 204.86 this morning to get short. (See my 10:00 a.m. post in the chat room, which aired as SPY was ascending toward the target. The actual high was 204.83, followed by a so-far drop of 77 cents! [ Further update: SPY dropped $1.12 before finally turning around.]  Nov 14 204 puts that traded down to 0.22 have now doubled in price, and I've suggested taking a partial profit on half of any put positions to zero out our risk. _______ UPDATE (5:56 p.m.): After yesterday's profitable digression, we'll get back on track for the trade spelled out above, possibly adjusting the option price in real time in the chat room. We should also be on the alert for a possible downturn from 205.28 as well. That's

Yesterday's dirge wasn't quite the robust follow-through we were counting on, not by a longshot. Instead, the futures drifted lower after stumbling out of the gate. There was no selling pressure, just an absence of buyers, and so the futures took the course of least resistance rather than attempting a run at the 1194.10 target broached here yesterday (which remains valid). Now, I'll suggest using the more modest Hidden Pivot target shown, at 1181.70. A print at 1162.20 would trip the buy signal, but since I'd rate a follow-through to the 1168.70 midpoint pivot no better than an even shot, I'll suggest using 'camouflage' to get aboard. This implies waiting for a b-c pullback in a pattern of lesser degree from a point B high at either 1162.30, 1162.40 or 1162.50. I've labeled the still unformed pattern with a small ABC so that you can see what I'm talking about.