I expect index futures to open lock-limit lower Sunday evening, but if it’s not quite that bad, the ‘mechanical’ paper-trade I recommended earlier could be in effect. Specifically, it implies bidding 2496 for four contracts, with a stop-loss at 2402 that is just beneath the point ‘C’ low of the pattern shown (inset). I’ll be interested myself to see whether the ‘mechanical’-trade idea holds — i.e., that this type of trade works best when price swings are at their most violent. In this instance, once the contracts are acquired they would be subject to a 2590 price objective, o-c-o with the 2402 stop. Theoretical risk is $4700 per contract. The trade would not trigger if the opening is beneath 2402. A 5%-limit, gap-down opening would occur at 2394, just beneath the specified range of my guidance. Most immediately, expect more slippage to at least p=2156.00 (daily chart, A=3131.00 on 3/3) if Friday’s selloff continues as I expect. No matter what happens, I see much lower lows in the weeks ahead. That makes all rallies enticing shorts, although, as we’ve seen, this has been most difficult to pull off. _______ UPDATE (8:19 p.m. EDT): The bid filled at 2459.00, the price at which the futures opened Sunday evening. (Remember, this is a paper trade intended to familiarize you with ‘mechanical’ set-ups.) We are offering four contracts to close at 2590 with an o-c-o stop-loss at 2400.00. ______ UPDATE (Mar 30, 8:17 a.m.): I am exiting the position now with the futures trading at 2543. The theoretical gain is around $4100 per contract. Strictly speaking, applying a ‘dynamic trailing stop’ (which I’ve explained in the Trading Room), I’d have closed out the trade at 2559, reaping a further gain of $800. In this case, I am following my gut rather than strictly applying ‘mechanical-trade’ rules, since I believe the overnight peak at high at 2567, on gossamer volume, is as high as this hoax will get in the current, minor cycle. My change of heart is congruent with the skepticism I expressed about DIA in my current tout. It seems unlikely to get from X to p even if it trips a ‘mechanical’ buying signal. The difference between the two vehicles is that one trades during the night session while the other does not. It is much easier for DaBoyz to manipulate short squeezes at night than during the regular session.
