January 2014

It is puzzling that bullion seems to need stocks to fall in order to rise. Still, we'll take any gains we can get, and they've been pretty decent lately.  My minimum upside target for the rally begun on New Year's Eve is 1278.90, a Hidden Pivot target shown in the chart. Achieving that number shouldn't pose a problem for bulls, but we should want to see them do better by blowing past it with ease. The last $15 theoretical of this move could prove tradable for night owls, since, even on the 60-minute chart, there are some handholds for a 'camouflage' entry. (I've labeled the tradable pattern for your guidance, but the actual entry should be pursued on a chart of lesser degree and with the goal of holding theoretical entry risk down to five ticks or less per contract.)

Subscribers who followed my simple instructions yesterday were able to leg into the remainder of a bearish put spread that we initiated last week. Although we'd been trying to buy DIA puts since New Year's Eve, when the E-Mini S&Ps peaked a single tick from a potentially very important Hidden Pivot target at 1846.75, the options stayed just out of reach.  Then, on January 17, with stocks ascending, some Feb 7 158 puts finally came our way for around 0.34. Thereafter, it remained only for subscribers to short puts of a lower strike against them for 0.34 or better. This was easily do-able yesterday, when the Dow Industrials were down 240 points at their intraday low.  The selloff allowed us to short some Feb 7 155 puts for 0.34, giving us a virtually riskless $3 vertical bear spread (x 12) that can produce a maximum gain of $3600 if the broad averages continue to fall over the next two weeks. For now, though, you can sit back and relax, since our bearish bet effectively cost us nothing. As I am wont to remind you, zero zilch nada is how we should value puts when the stock market has been in a bull market that has been chugging along for nearly five years. Click here for two weeks' free access to the Rick's Picks chat room, where tradable ideas are served piping hot in real time. _______ UPDATE (January 27, 12:01 p.m. EST): Offer four of the spreads to close for 1.20, good till canceled. ______ UPDATE (January 29, 9:15 p.m.):  The spread was an easy exit today for 1.40 when the Dow was down 220 points at its lows. Imputing the theoretical gain of $480 to the eight spreads we still hold gives us an adjusted cost basis of minus

Netflix is up an obscene $64 in after-hours trading Wednesday following the announcement of positive earnings news and a robust increase in streaming customers.  There are reasons to think the buying is a tad overdone and that the stock may be building a new top here. For details, check out today's NFLX tout.

The futures played toe-sies with an 1842.75 midpoint resistance all day long on Wednesday but failed to get past it. My hunch is that it will succeed today. In any case, if and when 1842.75 is breached by more than 1.00 point, expect the rally to continue to at least the 1859.25 target shown.  If you're long for the ride, I'll suggest reversing the position and going short with an 1860.25 stop-loss.  If you hold no position at all, you can short up to four contracts there provided you use 'camouflage'. _______ UPDATE (January 22, 11:00 p.m. EST):  The futures  have been down as much as ten points Wednesday night, a decline of sufficient magnitude that we might infer that something is amiss in the geopolitical world.  My hunch is that it's the usual sleazy opportunism at work -- a shakedown prompted by who-knows-what-news.  If I'm right, selling should dry up overnight with the futures having gone no lower than the so-far bottom at 1828.75. If, on the other hand, sellers take out Tuesday's 1826.25 bottom, that would be mildly interesting, since it would generate a bearish impulse leg on the hourly chart.

So much for my crazy idea that the recent ruling against net neutrality would cause Netflix shares to fall. At this very moment, the stock is in the throes of one of the most vicious short squeezes I can recall -- up $64, or about 20%, in after-hours trading.  The ostensible reason for this entertaining effusion is that the company's Q4 earnings came in a few pennies above high-end estimates.  Also, they reportedly added 2.3 million streaming subscribers, a benefit that was offset somewhat by DVD customers who continued to desert the service in droves. Despite the huge rally this evening, I remain convinced that the court ruling will pose a very serious threat to the profitability of Netflix's streaming business, since it will allow ISPs to charge purveyors like Netflix according to the amount of bandwidth they use. Netflix is an inordinately large user, at times accounting for as much as 40% of all available digital pipe. We shouldn't doubt that the company will someday have to pay its fair share, even if such concerns are evidently not on the tiny, diseased brains of the lunatics and arse bandits who have goosed the stock into the ionosphere this evening.

Mr. Market continues to inflict pain on anyone who shorted the New Year's Eve high.  The next big break could go either way, but if it's higher, check out my E-Mini S&P tout for a risk-averse tactic to pick the next top.

Considering this company is squarely in the crosshairs of the recent 'net neutrality' suit brought -- and won -- by Verizon against bandwidth hogs like Netflix, it's a wonder the stock has been able to rally at all.  When the current dead-cat bounce has run its course, look for more slippage to the 312.99 target shown, or to 305.20 if any lower.  That second number can be bottom-fished with a 303.30 bid, stop 303.11, but you'll need 'camouflage' to attempt it at the first.

Yesterday's tout allowed for a pullback to as low as 1237.40 for gold to remain in feel-good territory, but the futures exceeded it, generating a bearish impulse leg on the intraday charts in the process.  You know the drill by now: We'll wait and see what the C-D follow-through leg looks like before we jump to negative conclusions. The most bullish thing that could happen would be for C-D to reverse from the midpoint pivot or higher, and then to generate a bullish impulse leg on, if not the hourly chart, at least the 30-minute.  I've sketched this hypothetically for your further guidance. ________ UPDATE (January 22, 11:10 p.m. EST):  Sellers easily smashed the 1234.40 midpoint support noted above, implying this decline will continue over the near term down to at least 1224.90.

If you got short on New Year's Eve near the major Hidden Pivot target at 1846.75 discovered by chat-room regular 'Pietdup', you should be starting to see the problem by now. Clearly, nailing the all-time high within a single tick confers no license to simply forget about one's short position while it racks up profits over days, weeks and months. In fact, the futures have been head-butting the high nearly every other day lately, following up with swoons that will have lulled many a bear into thinking things were going swimmingly. The problem of shorting the potential Mother of All Tops becomes even more difficult if you have used put options to cushion yourself against the inevitable swings. We did so in the Diamonds, but the puts even on good days have done no better than merely hold their own against time decay. Well, I never said it would be fun. Or easy. In any case, there's not much more we can do right now -- other, perhaps, than wait for a head-fake to new all-time highs. If this should occur via a rally into the range 1850-1860, we should look diligently for a way to get short via camouflage. In practice, this would entail catching a downtrending abc on a chart of perhaps 5-minute degree or less. Presumably, this would occur shortly after the futures have rallied to the 'D' target of a minor ABC rally. That's how camouflage works, and it is the best way I can think of to take advantage of the kind of last-gasp, short-squeeze spike we should be expecting. Why should Mr. Market let any bear who is currently short escape without fatal impalement? More pain likely awaits, but we can console ourselves with the notion that it will be felt most acutely by