August 2014

If the broad averages are mustering energy for a steep blowoff, we should see it in spades in the shares of Apple, a reliable bellwether. In the Touts section today, I have provided some precise guidelines for determining whether such a scenario is unfolding, including two Hidden Pivot rally targets that are relevant to price action over the next day or two. If you want to see what kind of climax may be taking shape, check out the tout and the chart accompanying it.

Apple's high yesterday occurred just 2 cents from the 101.07 target shown, but on the weekly chart, the stock is already through a major midpoint resistance at 99.79 associated with a very long-term D target at 144.56 (A=11.17 on January 23, 2009).  I am calling attention to this because a blowoff of that magnitude in the stock would almost surely be part and parcel of a steep rally in the broad averages toward a major top. More immediately,  I'd like to see AAPL consolidate down to 99.79 after pushing decisively above it, but we'll be watching the lesser charts in any case for signs of significant buying power percolating beneath the surface.  One other Hidden Pivot resistance must be noted: 103.07, from the daily chart (A=89.65 on 6/25; B=99.44 on 7/29).  If it and the one at 103.07 are easily conquered, it would increase the likelihood of a blowoff to 144.56.  _______ UPDATE (August 26, 11:55 p.m. EDT): Apple is slipping beneath a 100.91 midpoint support (see inset, a fresh chart), implying it's about to fall to the 100.46 D' sibling.  Short it via camouflage on the 5-minute chart, using Tuesday's lows to establish an a-b impulse leg.  If you're short when 100.46 is hit, reverse the position and go long aggressively with a tight stop-loss. _______ UPDATE (Sep 1): The actual low occurred at 100.70, and although that's within 0.24 of the corrective low flagged above, I'll assume no subscribers got aboard unless I hear otherwise.  There are more bullish targets above that I could bring clarity to at the moment, but the bottom line is that you should bring a bullish bias to any trades, especially since there's potential for a ride to as high as 144.56. ______ UPDATE (Sep 3, 10:49 p.m.): The stock has plummeted nearly

Judging from the ease with which NFLX pushed past the midpoint pivot shown, more progress to at least 488.55 seems assured. With $16 of potential upside from here, we could get long using a $5.30 trailing stop to mechanically manage dynamic risk. That would keep risk:reward in the 1:3 relationship that I always advise. However, the trade will have a better chance of succeeding if we initiate at a swing low coinciding with a midpoint pivot or D correction target.  However, any such opportunities we might have looked for yesterday would have proven tricky, since corrective targets were not precisely hit (owing in some measure to the fact that none of the downtrending ABC patterns shown contained a valid impulse leg).  If you're more comfortable boarding with-the-trend (i.e., the uptrend), then camouflage is the best way to go, presumably using an entry signal on a chart of 5-minute degree or less.

Mr. Market served up a new all-time high with a characteristic dash of humor yesterday -- i.e,  in the closing seconds of the day. Actually, he went one better than that -- literally -- by creating the new high just a single tick above the old one from July 24. Do we dare short this short-squeeze-powered monster? I'd raised the prospect in yesterday's tout, noting that the hysterical price action of trading vehicles pushing above old highs (and below old lows) is perfectly suited to our 'camouflage' entry tactic. As it happened, we would not have needed camouflage, since a 1986.25 target I'd posted in the chat room an hour ahead of Wednesday's climactic upthrust nailed the intraday high within a tick. But staking out a short position at the final bell is asking for trouble, and so I advised doing so only to subscribers able to monitor the trade, and to cover it if necessary, during the night session. We should remain wary nonetheless of a bull trap, since the hubris attending a breakout to new all-time highs is always going to coax forth a dangerous mix of daring and complacency. We went short in July at a 1984.25 Hidden Pivot target that I'd been drum-rolling for weeks, but we covered the position the next day when the futures head-faked to a (very) marginal new top at 1985.75. Picking the top of a bull market that hasn't had a significant correction in...years is always going to be challenging, and my gut feeling is that the actual high will be seen in retrospect as having been more or less unshortable. We aim to keep trying, though, simply because we can, perhaps even making a few bucks on pullbacks that prove to be short-lived. With a free trial subscription, you can

We spent the entire hour chasing Netflix lower, zooming our way down to the 15-second bar chart in the process. The niggling details of finding tradable patterns at that level are surely worth pondering, but the more valuable insights came from psychologizing the dips, twists and turns. The ending is the punchline to a joke that all traders have been the butt of at one time or another, but I won't spoil it for you. Suffice it to say, NFLX bounced from a low that was almost, but not quite, perfect.

Short-covering bears have turned the stock market's recent selloff into a launching pad. Every time the broad averages inched higher yesterday they shorted anew, as they've been doing, leaving themselves on the ropes yet again when stocks ended the session near their highs.  At this point the Dow Industrials and S&Ps are all but guaranteed to test their old highs, which is what it will take to knock bears out of the game.  Thereafter, we'd be tempted ourselves to short this flying pig if the expected head-fake goes high enough to suck in 'everyone'.

Subscribers are working two bullish calendar spreads (x16), but I would suggest increasing the size of the position if TLT corrects down to the 115.18 target  shown.   For now , we are long September 20 118 calls against short August 19 118 calls that we will roll into August 29 calls this Thursday and Friday.  We’ve already done the roll twice, reducing the cost basis of the spread to 0.04. This week’s roll will entail covering (buying back) the short calls and shorting a like number of August 29 calls, effectively selling the August 22 118/August 29 118 calendar spread. It was marked on Tuesday at 0.17, off a 0.26 offer, but any price higher than 0.04 will effectively turn the position we’ll have  – long the Sept 20 118/August 29 118 calendar -- into a credit spread.  This means we can’t lose – will make a profit no matter what TLT does.  Ideally, come September 20 , TLT will be sitting at 118, our spread will be trading for around 0.50, and we’ll be carrying it for a credit of perhaps 0.50.  The imputed profit would be  $1600 -- not bad, considering our risk is already close to zero. My long-term outlook for T-Bonds is very bullish, a view that goes sharply against a consensus which clings to the belief that interest rates – and the stock market -- can only go up.  That is a bet we should be eager to fade. We may have a chance to do so at still better odds if T-Bonds continue to  sell off  on the manufactured idea that the Jackson Hole conference will open the floodgates for more stimulus and inflation. _______ UPDATE (10:38 a.m.):  The Sep 20/Aug xx calendar spread is recommended at this point only for those who did

We went boldly where so many other traders seemed to be yesterday -- i.e., to the short side of this vehicle, testing the moxie of a 1974.75 rally target that looked like it might show some stopping power.  It did, although not for long. The futures quickly munched their way through the Hidden Pivot, and although they didn't get much further, it was clear that short-covering bears would continue to be their own worst enemy.  There's little point in trying to get short now, though, since the September contract is within the magnetic field of July's all-time high and will be drawn to it. We'll take another look when it gets there, though, since the 'camouflage' tactics we sometimes employ to initiate trades work especially well when other traders are in a state of hysterical fear or greed. To us, the wild price swings they are apt to cause are simply impulse legs -- and potentially tradable, as you shall see.

Those who remained short at the close yesterday could not have felt very comfortable, considering that the broad averages were closing on their highs without having pulled back much intraday. Still, you never know.  Mr. Market greets each new day with no emotional attachment to whatever it was traders were feeling on the previous day.  We're short DIA in any case -- tied, as always, to a very tight stop-loss.