If a wicked downdraft is brewing, my gut feeling is that it will draw its destructive power from a bull trap high rather than from a secondary peak that has thus far failed by a tad to achieve new record highs. It is a matter of catching traders with their pants down versus pulling out the rug when they’re half expecting it, as may be the case now. In hard numbers, this means I view a move to new highs as more likely than a downturn surpassing the key low at 153.12 recorded the first week in February. At-the-money straddles with nine days left on them are going for around $3 — too pricey for my taste. We may be able to leg on a ‘vertical’ spread, or even a straddle, so stay tuned to the chat room if you’re interested. ______ UPDATE (2:17 p.m. EDT): I don’t see much danger in shorting D=164.12 (see inset, a new chart) if this criminally inspired gas bag should waft up to the 164.12 target shown by day’s end. Plan on buying a dozen March 22 162.50 puts for perhaps 0.26 to 0.32 cents, and tie them to a 0.22 stop-loss thereafter. Don’t boldly pay up for these pups, by the way, since they will be evaporating tomorrow like dew on cactus if DIA is stagnant.
