DaBoyz have pulled their bids early Sunday evening, allowing the E-Mini S&Ps to fall 17 points so far — equivalent to a 140-point drop in the Dow. Air-pocket weakness such as we are seeing at the moment very often produces a bullish outcome, since it allows those who jockey the markets for a living to exhaust sellers, the better to set up a short-squeeze rally on the opening. Sometimes this strategy will fail, however. It may turn out that that the initial leg down was a relative ripple ahead of a tsunami. Even DaBoyz don’t know yet whether this will turn out to be the case, since it is unpredictable as to whether the price drop that has already occurred will touch off a panic that could generate yet new waves of selling. Fading the trend on a Sunday night is a dangerous game, to be sure. Whatever happens, the DIA puts and VXX calls that many subscribers bought last week and which were already showing very substantial gains have effectively immunized them against fear or worry.
Sunday Evening, and DaBoyz Are Trapped in a Very Risky GamePosted Sunday, March 26 0 comments
$+DIA – Dow Industrials ETF (Last:205.75)Posted March 26, 2017, 6:04 pm
Our put tracking position has performed very well. That’s because, based on my initial guidance and updates, subscribers were able to buy the options precisely when the broad averages were topping last week. Based on reports in the chat room, quite a few subscribers took this trade, and some have reported realizing gains so far exceeding $3000. Officially, however, I am tracking three March 31 208 puts that remain from an original purchase of sixteen. Based on Friday’s 2.60 closing price for the puts, the tracking position’s gain is $1090. For now, continue to offer a single contract to close for 3.70. If you purchased a multiple of the original 16-contract order, you can increase the size of your offer commensurately. DIA’s intraday charts suggest it could fall as low as 203.37 this week if the pattern shown (see inset) plays out as we might expect. Although DIA rallied into the close on Friday, this occurred after it had decisively breached the midpoint Hidden Pivot support at 205.34. That’s mildly bearish. Keep in mind as you hold a few puts to swing for the fences that they would be worth nearly 5.00 apiece if the target is reached before Wednesday. That amounts to nine times the 0.56 we paid for them less than a week ago. ______ UPDATE (Mar 26, 8:12 p.m. EDT): Index futures have broken sharply lower Sunday evening, putting us in good shape to take more profits. Anything could happen on the opening, but on the premise that the puts will spike to their intraday high moments after the opening bell, I’ll recommend offering two thirds of the three-contract position (or multiple thereof, depending on how many you still hold) for 5.90. This order should be placed BEFORE the opening. If it is not filled, cancel it immediately and sell the options at-the-market. You should keep the remainder of your position for a swing at the fences.
$+VXX – S&P VIX Short-Term (Last:16.71)Posted March 26, 2017, 6:03 pm
We used a Hidden Pivot price target on Friday to exit call options acquired three days earlier for nearly three times what we’d paid. Four April 7 16 call options remain in our position. Based on the option’s 1.10 closing price, the position is showing a theoretical gain of around $1082. Imputing gains realized so far will allow us to carry the calls with an effective cost of minus 0.47. The chart shows how we were able to close out the calls precisely as the underlying VXX was spiking to an intraday high of 17.50. It would have been extremely difficult to do this the ‘usual’ way, waiting to see what the bid/asked was on the calls when VXX was hitting its target. There would have been only seconds to determine this and place the order. Instead, we simply projected in advance that the high on the calls would be 1.69. This permitted us to place an order before the opening to sell them for a tad less — in this case 1.64 — to raise our odds of getting filled. The calls topped at 1.70, a penny above our target, making our profitable exit effortless and certain.
This is a relatively new approach for Rick’s Picks, and it is working well. A corresponding put trade in DIA delivered similar results. March 31 208 puts acquired earlier in the week for an average 0.92 could have fetched as much as 3.32 on Friday when stocks swooned on news that Trump’s healthcare bill had gone down in flames. Both of these trades were featured on The Scoreboard, a list of pending, explicitly detailed recommendations posted by Rick and some advanced Hidden Pivot students. _______ UPDATE (Mar 26, 8:45 p.m.): Before the opening, offer two calls (or half of your remaining position) at-the-market. If you don’t subscribe but would like to join great traders from around the world in the chat room, click here for a free two-week trial subscription. You’ll also receive actionable trading ‘touts’ and invitations to frequent ‘impromptu’ sessions where Rick ‘takes requests.’
$ESM17 – June E-Mini S&P (Last:2342.75)Posted March 26, 2017, 6:03 pm
$GCJ17 – April Gold (Last:1243.30)Posted March 26, 2017, 6:03 pm
$GLD – SPDR Gold Trust (Last:118.67)Posted March 21, 2017, 9:30 pm
$SIK17 – May Silver (Last:17.610)Posted March 20, 2017, 8:25 pm
$DXY – NYBOT Dollar Index (Last:100.30)Posted March 19, 2017, 6:03 pm
I’ve included the Dollar Index in today’s list of touts not just because the U.S. dollar’s ups and downs affect the economic world more than any other trading vehicle, but also because the greenback is moved by market forces far bigger than the eggheads, navel-gazers and charlatans at the Fed could pretend to control. The long-term chart is unambiguously bullish, notwithstanding the stall since December. This stagnation presumably is corrective, since the Nov/Dec peak exceeded a prior high at 102.15 recorded back in 2003. That makes the rally itself, from last May’s 91.92 low to the recent high at 103.82, bullishly impulsive — an analytical distinction whose significance would not be lost on our Elliot-Wave colleagues. While I would not hazard a prediction about how long it will take for the dollar to consolidate in order to achieve the 113.40 target shown, when the move finally happens, as I very strongly expect it will, bullion prices, U.S. manufacturers’ overseas profit margins and all who owe dollars will come under renewed pressure. _______ UPDATE (Feb 26, 7:57 p.m.): Last week’s pullback tripped a ‘mechanical’ buy signal at 100.83 off the pattern shown. If this bounce achieves and then exceeds the 102.09 target, it will shorten the odds that the Dollar Index is on its way, eventually, to 113.40. _______ UPDATE (Mar 2, 8:52 p.m.): Today’s thrust somewhat exceeded the 102.09 target, implying that still-higher prices are coming, presumably to 113.40 eventually. _______ UPDATE (Mar 19, 6:00 p.m.): With last week’s moderate selloff of the dollar, traders seemed to be betting that France’s election on April 23 will go the way Holland’s went — i.e., with a less-than-decisive victory for the ‘Trump candidate’, Marine Le Pen. This strikes me as a dangerous bet, but we shouldn’t be surprised if the trend continues for the next few weeks as pollsters and the news media do their disingenuous best to knock Le Pen down. The juiciest odds to bet it the other way will likely come on Friday, April 21, but we should stay on the sidelines for now.
$TLT – Lehman Bond ETF (Last:120.61)Posted March 13, 2017, 9:48 pm
This proxy for T-Bonds has quietly slipped into no man’s land with the recent breach of December’s bombed-out lows near 116.80. Even before this occurred, TLT looked like a good bet to fall to at least 111.97, the midpoint Hidden Pivot support of the pattern shown. But it would require only a breach of the July 2015 low at 114.88 to do very serious damage to the long-term chart. If the 111.97 target is hit, it would correspond to a rise in long-term interest rates to about 3.37% from a current 3.19%. And if TLT were to fall all the way to the D target at 100.79, yields would be around 3.84%. For borrowers in the U.S. and around the world, this would be more than just a turn of the screw. Indeed, if stock prices were to fall simultaneously as seems logical, it would crush them beyond any hope of recovery. Meanwhile, any counter-stimulus equal to the problem would be tantamount to hyperinflation. _______ UPDATE (Mar 20, 8:41 p.m. EDT): Is this rally fated to go nowhere like every rally since July? We’ll know if and when it interacts with so clear and compelling a target as the one shown, at 119.97 (click here for chart). Merely reaching this benchmark will tell us little; however, if buyers can demolish it, that would give TLT a fighting chance to probe the resistance of peaks made in January and February as high as 123.14. _______ UPDATE (Mar 22, 9:55 p.m.): TLT impaled the 119.97 ‘hidden’ resistance noted above, implying that the pullback currently under way is likely to generate another bull leg. It will need to be a doozey, however, since it must surpass Feb 28’s 122.07 peak to generate a fresh impulse leg on the hourly chart. (Click here to see this graphically).
RINF – Inflation Expectation (Last:28.84)Posted March 9, 2017, 6:23 pm
RINF is the symbol for an ETF trading vehicle that tracks inflation expectations. This is of more than passing interest to me, since I’ve been a hard-core deflationist and written on the topic for more than 30 years. RINF has yet to break out on a long-term basis (see chart above), and I am extremely skeptical that it will. Incipiently deflationary forces arising from debt, and from the substitution of machines for workers, are vastly more powerful than any catalyst one could imagine for inflation. As such, those hitherto intractable engines of inflation — government, healthcare and college tuition — have hit a wall. Quite clearly, none of us can afford to pay more for those things than we are already paying. A surge in wages seems most unlikely to alter the equation.
Meanwhile, private pensions and the Social Security system are headed toward certain bankruptcy. This is one problem that cannot be monetized by having the Fed purchase Treasury debt, since it involves actual cash dollars that would get spent by recipients each month on real goods and services. Someone would have to pay for those things, and that someone would have to be working stiffs who, perforce, would be taxed to death. Nothing could be more deflationary than a collapsing pension system. Unfortunately for us all, it is inevitable. The only reason we are not as worried about it as we should be is that the financial psychopaths at the Fed have pumped up the stock market to assuage our fears. To complete the delusion, our actuaries are hard at work factoring pension returns for the next 50 years as though the bull market in stocks will continue forever. It won’t, of course, and when it finally ends — which it will — the epiphany of our bankruptcy will come literally overnight.
Concerning RINF’s chart, it is inconclusive on the matter of whether an inflationary spiral awaits. I have given my reasons why I think this is nearly impossible. However, a dead-cat bounce to the 31.34 target is not beyond the realm of possibility. If it happens, I would expect it to be the last hurrah for both inflation and Fed hubris. It might even prove to be a precise marker for the onset of a deflationary debt collapse that long ago became unavoidable.
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