August 2012

Our tracking position contains eight (or a multiple thereof) Dec 620-Oct 620 put spreads @ 14.00 and four Sep 615 puts shorted for 6.20.  This strategy will work best if Apple is buoyant in the days ahead, allowing us to cover the short puts for a fraction of what we paid for them.  Accordingly, cancel the spread-legging bid I'd advised for the September 625 puts and instead bid 2.20 to simply cover the Sep 615 puts.  It'll be interesting to see how much mileage DaBoyz can squeeze from Apple's patent victory, but I should think they'll be able to at least panic shorts into taking out the massive supply created by last week's bull-trap high near $675.

As last week ended the Dow was in yet another undeserved rally, recouping fully half of the 300-point loss it suffered earlier in the week. And yet, with exuberance gushing back into the markets, we found ourselves irresistibly drawn to…put options.  Hours earlier, we had missed buying some November out-of-the-money QQQ puts by two cents, and although this left us feeling slightly remorseful at the bell, we were cheered when it was reported after the close that Apple had been awarded $1.1 billion in its patent infringement suit against Samsung.  To be sure, the news itself was bad for consumers, bad for Samsung in particular, and bad for the retail electronics business in general. As how could it not be?  Apple’s victory has redefined patent infringement so broadly that, henceforth, any consumer electronics company with a designn idea is now at least somewhat more likely to find itself blocked or intimidated by a competitor's patents. Or so it would appear. Although we have not pored over the legal minutiae, we trust that a news report we read got it right in characterizing the lawsuit as pivoting significantly on “rectangles” – specifically, the size and shape of icons that can be maneuvered across a smart phone screen with one’s index finger.  Apple’s lawyers had claimed Samsung “stole” the shape of these rectangles, among other things, and now, unfortunately for all of us, the alleged theft has been defined in law so that any firm seeking to enhance the look of a smart phone screen with new shapes, designs or functionality will think twice before making such features commercially available.  And never mind that a fifth grader could have thought up the prosaic "innovations" that Apple has just won more than a billion dollars for patenting. Ripe for Correction So why did

Index futures were acting coy Thursday night, with the E-Mini S&Ps oscillating in an extremely tight range. My gut is saying the market wants to fall apart here, but we should keep in mind that ES could plunge nearly 50 points without even slightly mitigating the bullish feistiness of the daily chart.

As the week draws to an end, we'll temporarily put aside our plan to buy puts on strength.  At the moment, the Cubes looked bound at least moderately lower, to the 67.49 target shown. You can bottom-fish there with a stop-loss as tight as 4-5 ticks, but keep in mind that we'll be looking to short any rally that promises to sputter out at a minor Hidden Pivot swing point. ______ UPDATE (11:25 a.m. EDT): After falling to a low 11 cents from the correction target given above, QQQ is in the throes of a truly stupid rally. Let's reactivate the bid for Nov 62 puts, bidding 0.75 for four of them and 0.72 for four more.  This is a day order. _______ UPDATE (August 27, 1:12 a.m. EDT):  As of early Monday morning, index futures weren't getting much lift from Friday's patent news concerning Apple.  Even so, we'll practice restraint as we try to buy Nov 62 puts again.  Bid  0.74 for eight of them on the opening, but if you're not filled, lower the bid to 0.72 and leave it in for the day. _______ UPDATE (August 28, 12:28 a.m. EDT):  Chat-roomers reported fills at 0.72, the low of the day, so I'll track eight Nov 62 puts bought for that price.  Since it is our custom to take at least a small partial-profit on all put positions if the opportunity should arise, let me suggest a roundabout way of doing so: Short-sell eight (or a multiple thereof) November  58 puts for 0.72, good-till-canceled.  It will take a hefty decline in the underlying shares to get this order filled, but if we're successful, we will have legged on a vertical bear spread with the potential to produce a gain of as much as $400 with no possibility of

September Silver has yet to correct after ripping through a gaggle of prior peaks, two of them legitimate 'externals' on the 480-minute chart (see inset).  Entry opportunities will exist only for the quick, the bold or for camouflageurs, but all should be wary of the correction that could come at any time. My hunch is that it will be vicious but fleeting, and so you should pay attention to any p or d supports that come into play in the retracement. Please note that when trading vehicles move as swiftly as this one, Hidden Pivot swing points tend to work with even greater precision than we are used to.  _______ UPDATE (Sunday, August 26, 2:58 p.m. EDT): Friday's feint lower set up a push to, most immediately, 30.840 (30m, A=30.405 at 11:30 a.m. on 8/24); or if any higher, to the 30.880 target of a larger pattern begun from 30.100 on 8/23. As always, an easy move through either of these Hidden Pivot resistance points would portend still-higher prices.

Notice in the chart how [last week's] burst ripped through the 1672.10 target of a clear and compelling pattern. This strongly implies that the futures are still eager to run, even after the torrid performance of the last several days. Accordingly, we should focus on the 1801.30 'D' resistance of a large bullish pattern begun on 12/29/11 from 1535.00. The 1535.40 point C recorded on 5/16/12 is only slightly higher, but only a tick's difference is required to qualify the entire pattern as a bullish ABC.  It's p midpoint at 1668.40 was exceeded yesterday by a hefty 9.10 points, suggesting the futures have made up their mind to go for 1801.30.  A pullback to p should be viewed as an opportunity to buy on weakness, but it would be with the understanding that a subsequent rally could come following a consolidation, or, alternatively, a touch-and-go landing.

The by-the-numbers follow-through yesterday to Wednesday's A-B decline came within two ticks of an obvious D target at 1397.50. This number was flagged during the impromptu online session, although not with any great enthusiasm. The support lacked appeal not only for its obviousness, but also because it roughly coincided with some lows from last week.  There are a bunch more to the left of them that go back to August 3, but my gut feeling is that sellers will breach all of them today, creating an impressive bearish impulse leg that is a logical consequence of Tuesday's nasty bull trap. If the week ends with a selloff is as steep as Thursday's, it would test the support of a midpoint pivot at 1393.00, and if any lower, at D=1383.00.  This being a Friday, trading these two numbers (and that's assuming C=1403.00 survives) will have to be catch-as-catch-can.

Web-based crime is spinning out-of-control, presumably because it’s so hard to get caught and so easy to tap into an unlimited supply of rubes.  Here’s a test to determine whether you may be a rube yourself. Would you follow the instruction if this message popped up on your cell phone:  “Click here to claim your $1000 gift coupon”?  That’s what we thought. Of course you wouldn’t.  Only a retiree with a brand-new smart phone would be that stupid.  But suppose the sender had identified itself as Best Buy, and that you’d made a purchase at a Best Buy store just 15 minutes earlier? This is where the gullible and the feeble-minded get culled from the pack.  A quick thank-you note from a store where you’ve just made a purchase (and which has stored your phone number) hardly seems implausible, right?  But how about the $1000 prize? We took a pass, perhaps because we’ve never hit the lottery for more than $6.  Our first thought about the offer was that the outcome would probably be no different if, instead of following the link, we were to mail our wallet, credit cards, house key and Social Security number to some Russian hacker. Instead, we called a Best Buy store to ask whether they knew anything about this message. They did, but not much. Surprisingly, they rejected the idea that the scammer knew about our minutes-earlier purchase because they had somehow tapped into Best Buy’s server and were stealing point-of-sale information. Although this scam has actually been done before, big-time, Best Buy said the message we’d just received was merely a coincidence. We’d never gotten any similar messages before, but Best Buy was unpersuaded that it had been more than happenstance. They suggested we call corporate customer service, and we did.  It took

Bonds and precious-metal shares have been acting differently lately, even as the Mother of All Bear Rallies continues its relentless climb. Is inflation about to surge? Could be. In any case, because T-Bonds have been in a bull market for three decades, any change would have significant implications for all other classes of investables. During this session, we looked at some key charts to determine whether we might be witnessing the beginning of a tidal change..