May 2011

With a 1371.00 rally target coming into focus, let's plan on shorting two contracts there with a stop-loss at 1372.25. As always, this should be viewed as a longshot play with the uptrend in the broad averages now entering its 27th month. Since we're risking 1.25 points theoretical, the first opportunity to take a partial profit would come on a pullback to 1367.25.  However, the remainder of the position could be managed as you please if you feel like swinging for the fences.  I've included a chart that shows how pretty the pattern is now that it is almost fully developed.  Note the use of a one-off 'A', the integrity of which has already been confirmed by a stall a tick from its sibling midpoint, 1359.00. _______ UPDATE (11:07 p.m. EDT):  With the futures in a quite vicious short-squeeze Sunday night attributable to news of bin Laden's death, we got stopped out for small change (i.e. , a theoretical loss of about $62 per contract). Consider it the cost of determing the next stop:  1385.50.  That's a Hidden Pivot, and I'll suggest shorting a single contract there, stop 1386.25.  There's always the chance our stop-loss will prove to have been a smidgen too tight, but my gut feeling is that the 2.50-point overshoot of the target is sufficient to imply the next will be reached.

The yellow flag is out for two popular trading vehicles that Rick’s Picks tracks closely – Comex Gold and the E-Mini S&Ps.  Is a major top in the offing?  We’d say the odds are against it for stocks, since there is little evidence that the promiscuous Fed easing that has pumped the stock market full of hot air is going to end, even if it is officially slated to do so in June. In any event, we’ve told subscribers to expect a peak of at least tradable significance in the June Mini-S&P contract at exactly 1371.00. We routinely identify such peaks, and provide detailed recommendations for getting short at each, although we don’t do so with the expectation of catching the exact high of the Mother of All Bear Rallies. You might just as well bet on a 30-to-1 horse that hasn’t finished in-the-money for two years.  Because the stock market has been chugging relentlessly higher since March 2009, “picking the top” is never going to be an odds-on bet.  That is not to say that picking “a top” is particularly difficult, as our subscribers would readily attest. In practice, we always advise taking a partial profit if the pullback we expect from a Hidden Pivot rally target is generous enough to allow it.  Traders invariably make better decisions once they’ve taken some of the house’s money off the table, and that is why we try to take partial gains, however small, when a trade goes our way. This also allows us to widen the stop-loss on whatever position remains -- and, in theory, to come out of the trade with a small profit even when we are wrong about the bigger picture. Concerning Gold, minor, technically-derived targets have kept us quite bullish the whole way up. But the most