Diamonds

We found an E-Mini bottom to trade during this session, since the futures had plummeted 12 points, to within a hair of an opportune midpoint pivot identified that same morning in a tout. After the trade triggered, we followed it to the point of “success,” i.e., to the C-D midpoint, where we were able to cash out half of the position. Moving on to other charts, we found some good technical reasons to be untroubled by bullion’s weakness. We also saw, in real time on the Diamonds’ weekly chart, why stock market bears should brace for more upside of as much as 900 points.

Yesterday's 118.43 high came within 0.05 points of surpassing a key peak recorded in August just ahead of a selling avalanche. There is no disparaging the importance of this peak, the penetration of which would re-energize the bullish impulse on the weekly chart. Unfortunately, bizarre strike-price adjustments have made this vehicle all but untradable, at least by retail customers.  My strategy would be to butterfly the 127 strike, since that's where DIA appears to be headed. As an alternative, we may be able to use SPY options as detailed elsewhere in today's touts.

In the chat room earlier this week, I recommended buying Feb 115 puts if and when DIA hit a rally target at 117.61. They spiked to 117.65 on Wednesday, so I will establish a tracking position of four puts @1.20 for your further guidance. (The low on the puts was 1.18). There were corresponding short recommendations in the E-Mini S&P, which fell three ticks shy of an 1185.25 target; and in the Mini-Dow (YM), which failed by 29 points to reach its 11759 target.  Concerning our put position, I'm going to suggest closing out two of them using a 1.42 offer, good-till-canceled.  Make it one-cancels-the-other with an order to close out all four puts at-the-market if they should touch 1.20 again. ________ UPDATE: We scratched the puts for no net gain or loss when the Diamonds began the day with renewed strength. The puts blipped very sleazily up to 1.36 on the opening, as put options in a bull market are wont to do, but that wasn't quite good enough to take us out at a profit. We'll continue to short every potential rally top simply because we can -- more or less painlessly.

Because several of the vehicles that Rick’s Picks trades and forecasts actively were approaching imnportant inflection points, we spent most of the session identifying possible trade set-ups. Woeking mainly with hourly charts, we located precise spots to get short in the Mini-S&P, the Mini-Dow and the Diamonds (by way of buying February 115 puts). Gold and Silver were in no hurry to go either up or down, but a close analysis revealed why, amidst the most serious correction in months, our bias should be moderately bullish.

We own four January 111 puts for 0.97, but there is no point enduring more pain, considering that we were speculating without a price objective to begin with. Accordingly, I'll suggest that you exit the puts on a sell-stop if they trade for 0.47.  (Note: The so far low, achieved Wednesday, is 0.49.)   We'll try to get short again at another, presumably more opportune, time. _______ UPDATE: We exited the puts @ 0.47 off an intraday low of 0.46.   The trading loss was $205 plus commissions.

We continue to hold four January 111 puts for 0.97.  My short-term bias is slightly negative, since the Diamonds have been working on a bearish impulse leg since Thursday. For now, do nothing further, but please note that the downtrend would need to touch 113.76 today to refresh the bear trend.

We hold four January 111 puts for 0.97 bought shortly after the opening on Wednesday.  The options were acquired not because the Diamonds were peaking at a Hidden Pivot target, but because they were starting to look tired. I am unable to project a downside target at the moment, other than a minor one at 114.59 (or 114.39 if any lower). That's a Hidden Pivot, and because its sibling midpoint at 114.87 has already been breached, it can serve as a minimum objective for now.

Just for the hell of it, let's try to buy four January 111 puts.  They closed @ 1.01, but I'll recommend bidding 0.97 for them at the opening. Stay tuned, since I may adjust the price. _______ UPDATE (9:53 a.m. ET):  We bought four puts for 0.97.  Do nothing further for now.

Despite yesterday's swoon, the Dow still looked bound for at least 11367.  The equivalent for the Mini-Dow is 11327, as noted earlier, and for the Diamonds 113.68.   As before, we'll try to short DIA by buying two December 112 puts when the target is reached.  I estimate that they'll be selling for about 2.38, but the best way to buy these options for a fair price is to simply monitor the spread for them as DIA closely approaches the target. _______ UPDATE (10:01 a.m. EDT): The exact high so far of today's QEII short squeeze is...113.68. This has allowed us to buy two Dec 112 puts for 1.96. (Option volatility got CRUSHED by the rally.) We'll risk 0.16 apiece on them, stopping ourselves out if they trade down to 1.80. I estimate that DIA would need to be trading for around 113.95 today to trigger our stop. _______ FURTHER UPDATE:  We were stopped out at 1.80 for a $32 trading loss plus commissions.  Although the Hidden Pivot resistance contained the gap-up rally that began the day, it was no match for the second-wind onslaught now in progress.