September 2008

The futures are getting whacked in night trading, presumably because the usual idiots are fearful that all the other idiots are starting to fear that prospects for enactment of the $700 billion sausage are dimming. This is rubbish -- the pols unfortunately are not about to let us down -- but if it persists, chalk it up to the fact that DaBoyz think they'll get more bang for their short-squeeze buck if the Momentous Announcement comes over the weekend. Regardless, our formerly too-ambitious rally target at 1257.75 will remain viable as long as 1180.25 (aka point 'C') is not exceeded to the downside. More immediately, night-shift sellers are apt to meet with resistance at 1192.75, a midpoint support whose pedigree lacks the je ne sais quoi that might bring us more enthusiastically to bottom-fishing. _______ UPDATE: The futures have fallen hard overnight, picking up support in a perhaps too-obvious place --i.e., near lows made the previous night, before Thursday's short squeeze. If the bailout remains stalled, as seems likely, and the stall persists next week to the point of genuine seriousness, the ES futures would face additional jeopardy to as low as 1085.50, a Hidden Pivot target that goes back to a 1431.50 peak recorded back in late May.

We're bidding 20 cents g-t-c for 32 March 2.50 puts (GMOP), trying not to grow discouraged over GM's weakness on a day when the broad averages soared. Let's increase the bid to 0.28 -- and I will continue to encourage you to raise it by a penny or two (or three, or four) above the market-maker bid at sporadic intervals throughout the day. Harass them like this for long enough, and they will find a way to get rid of us by filling our order. Concerning GM's relentless slide, I don't think They are quite ready to pull the plug on the company, and so we should expect at least one wicked short squeeze with the potential to drag the put options down to our niggardly bid. _______ UPDATE: We'll put this trade aside for now, since GM has continued to sink and may never regain consciousness.

A Hidden Pivot resistance at 921.60 flagged here earlier can serve to alert us if and when bulls are ready to run. Were the futures to close above it for two consecutive days, they'd become an odds-on shot to reach 1014.70. In the meantime, night owls can try bottom-fishing at 872.10, stop 871.60, if the futures get hit without having first exceeded 889.40. _______ UPDATE: The futures have bounced robustly off an overnight low at 871.20, mocking my 50-cent stop-loss. This would be the second trampoline low in a week that I have caused you to miss because of my habit of showboating with ridiculously small stops. My solution will be to rethink the way in which I formulate touts, and, probably, to allow wider stops in general. _______ FURTHER UPDATE: Some subscribers appear to have done better than I might have imagined with the 872.00 target. I should mention that even my own trading partners tend to widen my stops beyond what I have explicitly suggested. Lately, they have been using stops of at least $2 to trade the swings in Gold.

For reasons that should be apparent to Pivoteers, the down-pattern that lacked that certain something in the E-mini S&P looks considerably more appealing in this vehicle. Accordingly, you can bottom-fish a Hidden Pivot support at 10765 with a 10767 bid, stop 10761. You'll be on your own thereafter. _______ UPDATE: The low was 10800, and the subsequent bounce of (so far) 130 points has mooted our bottom-fishing strategy. Cancel the order.

We didn't think we knew anyone affected by the bankruptcy filing of Lehman Bros. last week, but it turns out that it's likely to be felt by everyone in our neighborhood in some small way. That's because Boulder County, where I live, had $36.5 million parked in a state-regulated fund called Colorado Diversified Trust, $601,000 of which was in Lehman commercial paper. The bearer of these bad tidings was county Treasurer Bob Hullinghorst, speaking at a county commission meeting Tuesday night. He said he thought Boulder County might be able to recover between a third and two-thirds of the cash, but that it was doubtful the county could get it all back. Colorado Diversified is used by local governments to pool their money for short-term investments, so Boulder County is not likely to be the only loser in the state. In fact, according to Hullinghorst, Larimer County may be out $640,000, and the Poudre Valley School district stands to lose as much as $1.3 million. Multiply that by many hundreds of cities and counties across the U.S. and you begin to see how the damages could pile up. Hullinghorst said Boulder County's portfolio was 'as safe as we can make it,' but noted that even certificates of deposit (CDs) are cause for concern in today's economy. Boulder County evidently will be able to offset its Lehman-related losses with investment income from other sources that exceeded expectations. But it's hard to imagine that there will not be other losses in the future from investments that until very recently were considered nearly riskless. Will the trickle of red ink turn into a torrent as the scope of the banking system's troubles expands to encompass every city, town and county in the U.S.?

Look for more weakness culminating in a potentially tradable bounce from a low at 1151.00, a Hidden Pivot. If the support is approached in the first two hours, you can bottom-fish with an 1151.25 bid, stop 1150.25. Alternatively, if the E-Mini heads the "wrong" way and goes higher Wednesday night, I can discern no subtle trigger points that would enable us to get long with relatively little risk on the bullish breakout. However, a Hidden Pivot resistance at 1201.25 can serve as a minimum upside projection. ________ UPDATE: A pop overnight to 1206.75 created a feeble impulse leg that nonetheless adds credibility to an ABCD uptrend begun on 9/18. It points to 1257.75, a Hidden Pivot midpoint, but that seems too ambitious to me. Bottom line: When short covering runs out of steam today or tomorrow, look for the futures to turn tail and head for a key Hidden Pivot support at 1151.00.

The futures were moderately buoyant Wednesday night, bound, apparently, for a minor Hidden Pivot resistance at 892.90. However, the number to beat was 898.30, a small but technically important peak made on the way down yesterday (see chart). If that number is exceeded overnight, you can buy the breakout with a trailing stop of $1.50. You'll be on your own thereafter. _______ UPDATE: In retrospect, it is clear that we could have avoided the deceptive buy signal simply by using the hourly chart. It required a print above a 909.40 peak recorded on Tuesday to generate a meaningful bullish signal. Now, the futures look bound for at least 867.00, or to 853.00 if any lower. Alternatively, a print at 882.20 today would turn things around.

Once again, bid 1.58 for two October 39 calls (QQQJM). Ths gambit is predicated on a Hidden Pivot support at 39.03 identified here earlier. _______ UPDATE: Cancel the bid for now, since the Buffett short-squeeze has pushed the calls the wrong way.

Just when we thought Hank Paulson had run out of tricks, he and his merry band of pranksters have orchestrated an after-hours public relations coup that has caused the S&P futures to recoup nearly two thirds of yesterday's substantial losses in mere minutes. Here's a graphical picture of the action, as of about 7 p.m. Eastern: (Click on chart to enlarge) Can you guess what has occurred? Hint: The Sage of Omaha (pictured) was involved. In case you haven't heard, Warren Buffett has taken a $5 billion stake in Goldman Sachs and will help the bank raise another $2.5 billion by selling common stock to the public. Did Paulson miss a trick by not having Buffett stride onto the floor of the NYSE and let the world know he stands ready to buy bank shares from all sellers? But that's not exactly the self-effacing billionaire's style ' nor is throwing money away. Which perhaps explains why Buffett has chosen to buy into the bluest of blue chip firms remaining on the Big Board rather than loading up on extremely distressed mortgage paper. Goldman Gone Wild We were looking to buy a piece of Goldman Sachs [NYSE symbol: GS] ourselves yesterday, via a Rick's Picks tout that recommended naked-shorting some October 100 put options if the stock fell to $100 a share. Unfortunately for us, even though sellers hit Goldman shares pretty hard early in the session, at the nadir of their $10 swoon they never traded lower than $113. But that was before Buffett rumors evidently infused themselves into the market, causing the stock to reverse sharply to an intraday high at 125.39 in the final minutes of the day. So much for muscling ahead of Buffett at the bargain bin. We doubt that yesterday's announcement, presumably timed to inflict