Although my E-Mini S&P tout is ostensibly bullish, we shouldn’t pass up a low-risk opportunity to short the counterintuitive pattern shown. This is a set-up that I’ve been emphasizing during the Wednesday tutorial sessions, and the opportunity is appealing here simply because the crowd’s focus will be on whether DIA is about to break out above the 176.32 peak recorded on 8/10. We’ll look the other way, shorting DIA if it trips a conventional sell signal at the 174.70 point x of the downtrending ABC. This trade will work best if DIA opens slightly lower, but a precipitous move down through 174.70 would reduce its appeal. Obviously, a pop early in the session above 175.93, the point C of the bullish pattern, would negate the opportunity. You can use stock to initiate the position, but if you buy puts instead, stick with near-the-moneys that expire this Friday or next. _______ UPDATE (9:44 a.m. EDT): Stocks have opened weaker than we’d hoped for, prompting someone to ask in the chat room whether we should still try to short this brick. The short answer is no, but here’s my full reply: A rally back up to the trigger point, setting up a mechanical trade, would be the ticket [to get short] However, my concern is that, as usual, stocks are being manipulated sufficiently lower to dry up selling. We were looking to short DIA on subtle, creeping weakness, and this ain’t it. Paradoxically, DIA will become a tightly stopped bottom-fishing candidate if and when it falls to p=173.46. That would have been my minimum downside target if we had gotten short. I’ll be interested to see whether the usual pattern, where stocks make their intraday low on the opening bar, obtains here. If not, something has changed in a way that patient bears might take encouragement.
