October 2014

Three head-butts at the midpoint pivot shown lend authority to the 305.99 target associated with it. Since the bigger picture suggests AMZN could fall to as low as 266.12 before the traumatic correction begun last week has run its course, we'll plan on shorting cautiously at the rally target. Accordingly, I'll recommend buying  four Nov 22 280 puts for 1.00 or less -- contingent on the stock having traded no higher than 306.00. If the target is exceeded, or if the puts stay out of reach, we can adjust on-the-fly in the chat room.  Of course, there's an implied opportunity here as well to get long ahead of the corrective rally's possible last gasp. The rally might also offer us a possible Jackpot Bet, especially if Friday's opening bar is a downer. ______ UPDATE (November 3, 7:15 p.m. EST): The stock opened on a gap above 306.00, so we did nothing officially. So that we can have a horse in the race, and a reason to pay attention to this bear rally, I'll recommend bidding 0.42 for two November 7 295 puts, good for the first hour of the session. You should NOT load up on puts, however, merely because there is an outstanding target well below these levels, at 266. _______ UPDATE (Nov 4, 8:00 p.m.) Officially we did nothing. Although the stock rallied overnight, it opened lower, pricing the puts out of reach.

Even though the broad averages appear likely to trade at new record highs, I've recommended a small short in DIA not far above yesterday's peak.  I'm going against my gut on this one simply because that which I, and presumably many others, are unable to imagine -- in this case, the violent short-squeeze of the last two weeks simply sputtering out in the opening minutes  -- will always be worth betting against, at least in a small way.

After a ferocious, short-squeeze rally of 10% from mid-October's lows, the futures show no sign of slowing down. Yesterday they exceeded yet another peak on the daily chart, stretching their still-uncorrected winning streak to ten days. We can use the 2037.50 Hidden Pivot target shown as a minimum upside objective for the near term, since, as far as I'm concerned, it is all but a foregone  conclusion that it will be achieved. We can also plan on getting short at the target, with profits banked on the way up providing a generous cushion against the risk of intercepting the rally.

The Fed rarely has anything new to say, but the markets never fail to go nut-so for a few hours whenever the Open Market Committee puts out yet another hum-drum press release. That was the backdrop for this lesson, which featured not only the usual, technically-driven hunt for timely trading opportunities in some popular vehicles, but also the extra measure of caution required when the stock market is in a state of low-grade fear, uncertainty and hysteria.

The usual talking-head bozos were hard at work Wednesday night, struggling to wring meaning from whatever it was the Fed said earlier in the day.  In fact, the Fed said nothing differing from what it has said in its last fifty press releases. As always, the predictable tedium of the announcement didn't stop the stock market from going into wild spasms for a few hours. For the benefit of those who  participated in this embarrasssing spectacle, let me me repeat a prediction I made about six years ago concerning the question of when the Fed would raise rates. Answer: NEVER.  As for Quantitative Easing, it was just a PR hoax whose alleged termination will have zero impact on investables, including Treasury paper itself. Meanwhile, the Bond bears are so eager to get back on the wrong side of the bet that they are already playing the contrarian to a flurry of stories in the past month that explained why interest rates might actually be headed lower.  Let us state for the record that we see 15-year mortgages going below 2.4% while a global deflation continues to asphyxiate the Fed's failing stimulus program. Concerning the current stoking of Fannie and Freddie to blow another subprime bubble, there is NOT going to be another housing bubble, least of all one driven by buyers with dubious credit entering the market on 3% down. Desperate times may call for desperate measures, but this one is like trying to cure pancreatic cancer with cough drops.

If short-covering bears are going to be back at it on Thursday, we should see the futures reverse from no lower than 1966.50 overnight. This suggests a possible bottom-fishing opportunity for night owls, but be aware that a breach of p by more three ticks would put its 'd' sibling at 1954.75 in play.  If the futures head higher without retracing to 1966.50, a belated entry may be possible by using a pullback from just above 1976.00. That's an external peak that was recorded Wednesday on the way down, and you can find it on the 5-minute chart at 4:10 p.m. Eastern. An even subtler opportunity, drawn from the same chart, would be signaled by a pullback from just above the 1973.00 peak (this one is so tiny you may need a magnifying glass) recorded at 7:25 p.m. _______ UPDATE (6:49 a.m. EDT): The futures were squirrely all night and now look bound for 1957.00 after having failed to go higher overnight.  This looks like real weakness rather than an engineered attempt by DaSleazeballs to exhaust sellers. _______ UPDATE (1:12 p.m.): Short-covering hysteria has returned following a morning low at 1959.25. Looking for minor top at 1986.75.

The Dollar Index has been consolidating since early October for a likely push to the 87.98 target shown. Although this would leave it just shy of a breakout above the key resistance represented by the 2010 high at 88.71, it would not exhaust the rally targets that can be projected from 2011's bear-market lows.  The highest of them would not only beat 2010's top, it would also surpass the equally daunting one made a year earlier at 89.62.  If both of these resistance peaks are going to be exceeded, confirming the health and longevity of the dollar bull, we should see hints of this in the failure of corrective abc patterns in all time frames to reach their D targets.

In the chat room just now, and via an email alert that went out to all subscribers who have requested them, I've added a potentially tradable note to the current E-Mini S&P tout. (Check my 19:23 post for details, including precise Hidden Pivot coordinates.)  The information will probably be most useful to night owls who trade in European and Asian time zones, but the bottom line for all traders is that the little fillip at the tail end of Tuesday's rally generated a bullish impulse leg with much more power than is immediately apparent.

Use the 172.13 Hidden Pivot shown as a minimum upside objective for the next couple of days. Most immediately, and obviously, the target will be useful for staking out a long position. However, because the pattern itself is a good-looking one (albeit gnarly), and because the precise pullback to the midpoint pivot has confirmed the target, 172.13 will also work for shorting with a very tight stop-loss. You can do so using stock or options, but please query me in the chat room if there's a problem. ______ UPDATE (8:38 p.m. EDT): Shorting the 178.47 target shown looks like a juicier (and less risky) bet than the one I'd proposed, but we should still take the odds getting short at 172.13.  Accordingly, I'll recommend buying two Nov 7 171 puts if and when DIA gets with 0.04 of the target. A price of around 0.50 would be doing pretty good in the first hour, but time premium will be melting away as the day wears on, so don't pay up.  You should stop yourself out if the puts trade for 0.20 less than you paid for them. _______  UPDATE (8:15 a.m.): The stunning short-squeeze gap overnight has negated a short from 172.13, since, when options begin to trade, DIA will be more than a full point above that number.  The higher pivot at 178.47 now obtains, but it could be difficult to catch a ride, since "everyone" will by now be hugely bullish -- most particularly short-covering bears.