May 2014

The next place where we might look to short this mania-powered gas-bag would be at the 421.40 target shown, although we should be open to the possibility of a stall, or perhaps even a tradable top, near the 404.45 midpoint pivot. First off, though, and to provide a wider cushion for an eventual short, we'll try to get long by legging into the 415-420-425 call butterfly expiring June 6. Today only, with the stock trading 401 or higher, try to buy the 415-420 spread 1:1 for 1.20 or less.  If the stock is trading between 399 and 401, lower the spread bid to 1.00.  This is a day order. ______ UPDATE (11:24 a.m. ET): The 415-420 spread opened for a very pricey 1.35 with the stock in the throes of a head-fake that proved fleeting, so we did nothing. The spread is currently available for around 1.05, but that is no bargain with the underlying stock presently trading near 394. _______ UPDATE (8:42 p.m.): We'll wait for a better opportunity, so stay tuned. _______ UPDATE (May 30, 12:42 p.m. ET): This one has worked out nearly perfectly.  The stock peaked today just 34 cents above the 421.40 target I advertised when it was trading around 398.  It has since collapsed to 414, meaning there was a $700 profit per round lot to be had. If you shorted this 'gas-bag' as suggested, cover half the position now. It still looks like the best short available for betting on a stock-market collapse.

I have hidden this tout and the accompanying chart, with its 623.08 target, from public view because advertising it might compromise its usefulness. The target is sufficiently clear and compelling, however, that it should prove suitable for shorting no matter who knows about it. Accordingly, I'll recommend buying four June 600 puts expiring 6/6 if and when the stock gets within 25 cents of the target. I estimate that the puts will be a good buy at that time for around 1.30, but check in the chat room before you jump on this trade, since a price adjustment may be necessary. I will further suggest a 0.40 stop-loss on the puts, meaning you should exit them with a market sell-stop if they trade for 0.40 less than our basis price.  If the position survives, our next step will be to short puts of a lower strike for at lest as much as we've paid for the 600s. Meanwhile, if the futures don't open on Monday with a gap higher, your trading bias should be bullish until such time as the target is reached. Catching the move would yield a profit than can be used to widen the stop on any subsequent short position entered. _______ UPDATE (12:13 p.m. post from the chat room): AAPL June 6 600 puts look like they'll be trading for around a 1.60 bid when the stock reaches the target. No rush to buy them at that price, so stay posted for further guidance.

Traders should use the 1913.50 target shown as a lodestone on Monday.  The opportunity to get long ahead of the move may pass with Sunday night's session, but you can try shorting there in any case with an initial stop-loss at 1914.25. If the futures take out the stop, look for further, albeit limited, progress to the 1917.25 target of the larger, alternative pattern shown. _______ UPDATE (10:36 a.m. ET): This trade worked beautifully, since the futures peaked at 1914.00 just before dawn. I suggested covering half of the position in the chat room with the futures down near 1906.00. However, if you shorted only a single contract, or have already taken a partial profit, implement an impulse-leg-based stop-loss on the 5-minute chart. At the moment, that would imply stopping yourself out on an uncorrected thrust that exceeds two prior peaks, including one at 1911.50 recorded at 9:55 a.m.  If I hear from two people in the chat room who got short and who are still short, I'll establish a tracking position.

[The disaster that is Obamacare continues to grow, even as the mainstream media remains in denial about the program’s inevitable crack-up. In the guest essay below, Neal Muhlberg, a licensed health insurance agent with 25 years of experience, examines some of the ACA’s failures. He fears, however, that the best opportunity to replace the program with one that works came and went with the unsuccessful presidential bid of Ron Paul. Even so, there are glimmers of hope in evolving health care practices such as “concierge care,” which allows patients to pay with cash rather than insurance in order to receive prompter and more-attentive care. RA] A new McKinsey & Co. report finds that Obamacare's goal of providing coverage for the previously uninsured has failed. The report concludes that 74% of Obamacare enrollees at the end of the first open-enrollment period already had health insurance. Just 26% reported being previously uninsured. According to the Associated Press, at least 4.7 million policy holders lost their health insurance policies when their plans were declared “substandard.” Many of those individuals simply went through the Obamacare exchanges to buy policies to replace the ones outlawed by the Affordable Care Act. The same phenomenon occurred almost 50 years ago, when Lyndon Johnson implemented the Great Society programs of Medicare and Medicaid, ordering all insurance companies to cancel major medical policies for those 65 years or older, and charging a tax that everyone was forced to pay for programs whose resemblance to a Ponzi scheme has become increasingly obvious over time.  Under the ACA, this is occurring again for those under age 65. Is there any hope that the voters will rise up and throw the rascals out, repealing this disastrously misguided law? I hope so, but I doubt it. No Real Choice Let me explain. Polls

We wish you all a relaxing holiday weekend.  Stocks may be tradable on Friday for the nimblest scalpers, but don't expect to catch any big waves.  See you on Tuesday!

Beazer was a big winner for traders who saw the housing collapse coming in 2006 and shorted the stock with abandon. But not this time.  With mortgage re-fi's dead and the real estate market starting to relapse, the shares of home builders have been imploding in slow motion, punctuated by numerous short-squeeze rallies that have made it nearly impossible to stay short. My prediction a decade called for a 70% drop in home values over the course of a deflationary depression that has yet to take hold. This implies not only that very hard times lie ahead, but that prices were only halfway to a bottom when the economy lifted from the depths of The Great Recession in 2009. It also implies that the supposed recovery in home prices over the last few years has been little more than a dead-cat bounce. Now, just as the collapse of home-builder shares foretold the implosion of the economy, their slow death this time is warning that a recovery that never touched the broad middle class is over.

All signs were pointing higher at the close, which means there's probably about a 65% chance that stocks will head lower on Friday. That's the way things have played out on most days in recent weeks: The more bullish stocks looked at the end of a session, the worse they tended to open the next day. Factor in the undesirability of taking positions ahead of a long holiday weekend, and you're probably better off flipping a coin or casting the I Ching than trying to guess what the charts portend.  This won't necessarily preclude nimble day trading, but don't expect to surf a big wave.

Today's Crude Oil tout makes the case for $119 a barrel.  All bets are off if China's economy continues to cool, but from a purely technical standpoint $119 looks like an easy target at the moment. Although such as move would be merely corrective relative to the $148 high achieved six years ago in July, that would be scant consolation to everyone who consumes energy and pays for it.

I'm tracking eight June 13 320 puts acquired Wednesday for 1.12, as reported by several subscribers in the chat room. A 0.50 limit stop-loss is suggested, implying $496 of theoretical risk.  My intention had been to short NFLX when the stock was relatively quiet, but we wound up putting ourselves in the path of a full-blown short-squeeze that added nearly 5% to NFLX's valuation in a single day. There was admittedly an emotional component to my recommendation, since I regard the company as one of the most overrated of all the high-fliers. It does little good to assure you at this point that the company does indeed suck, and that those who bought shares so feverishly yesterday are going to be proven wrong wrong wrong.  They will be, of course. But at this point we'll need to allow for the pathetic fools to be at least a little bit wronger, since there is a minor rally target at 394.75 (see  inset) that seems likely to be achieved.  If it's any consolation, those who bought the puts we acquired for a mere $112 would have paid $1,800 apiece for them just two days earlier. _______ UPDATE (2:07 p.m. ET): The puts traded down to 0.50, stopping us out for a loss of $496.  I still regard this vehicle as an excellent high-beta vehicle for betting on a stock-market collapse. We'll try again, but with the explicit goal of reducing risk to zero or close to it.