Rick Ackerman

Trading opportunities were not exactly abundant during our hour together, but there is some detailed material here concerning a strategy to leverage longer-term trends using option calendar spreads. I detailed these tactics in an article that I wrote for Stocks, Futures & Options magazine long ago, but this recording recapitulates them in succinct form.

Thursday's entertaining effusion of stupidity, chaos and bravado raised my rally target a smidgen, to 2512.00. The target is shown in visual context in the accompanying chart (see inset). The end-of-day move through the red line, a midpoint Hidden Pivot resistance at 2503.00, suggests there is a very strong likelihood the target will be reached, presumably overnight or in the early going Thursday.  Don't expect much more than that, however, since many traders will be away from their desks because of the Rosh Hashanah holiday._______ UPDATE (Sep 22, 9:30 a.m.): So much for the 2512.00 target, which has been negated by a drop beneath the bullish pattern's point 'C' low. The futures have fallen yesterday and this morning, so far unconvincingly, and I have my doubts that last week's sideways scuddle ten points above these levels will have marked the final top of the bull market.

Talk is cheap, never moreso than when it comes from the mouths of the charlatans and quacks who run the Federal Reserve. Their latest "plan" is to start selling assets from the Fed's $4.5 trillion balance sheet in October; tightening perhaps 25 basis before 2018; then tightening three more times next year.  Translation: We will initially unload whatever crap the traffic will bear, which could be zilch; we will continue to talk the talk as brazenly as possible, pretending that 25 basis points of alleged tightening every now and then constitutes real tightening; and, we will treat the recession currently gathering force in the U.S. economy as though it could not possibly happen. So let me repeat this yet again:  The economy and the stock market are a house of cards, and any significant "tightening" in the year ahead is therefore as likely as a Martian invasion. Holiday Schedule A happy new year to those of you who celebrate Rosh Hashanah. In observance of this holiday, the beginning of a ten-day period culminating in Yom Kippur, the Day of Atonement, I will not be in the chat room on Thursday. Also, my trading touts for Thursday (which are being prepared before sunset) and Friday will be scaled back. A normal schedule will resume Sunday night.  

Everyone knows the Fed will not be announcing any imminent tightening, but that won't stop traders from going wacky in the minutes after the widely anticipated FOMC "news" comes at 2:00 p.m. As always, the central bank will leave enough room for the nitwads who presume to read Fed tea leaves to infer that there's room for tightening later this year if necessary.  At that point, tightening will be about as necessary as mustard gas at a PTA bake sale.

With the Fed scheduled to make its usual, momentous announcement on Wednesday afternoon, we should expect the stock-market to slow down even more between now and then, if such a thing were possible. It is astounding that the "tightening" hoax the Fed has conned pundits, economists and the hacks who invent the news into believing all these years still has any power over these yo-yos. For my part, I will return to a mantra that I repeated for more than a decade without ever being contradicted by fact: Significant tightening is about as likely as a Martian invasion. The Fed's 'inflation-is-lurking-around-the-corner' carny schpiel is one of the dumbest lies ever swallowed by the masses. Fade it and bet on the unwind with T-Bonds or dollar instruments if you want to win big -- and purge from your brain any notion about the return of inflation or of a heated economic recovery anywhere on the planet. Ain't gonna happen.

I don't often use the 960-minute chart, where each bar represents two full days of price action, but I am doing so now because it offers superb clarity with respect to trend strength and price. Notice how DIA barely paused before shredding a 223.18 Hidden Pivot resistance Monday that we might have expected to act like concrete. This strongly implies that DIA is about to head even higher, presumably to at least D2=224.73, or to D3=225.71 if any higher. I expect these Hidden Pivot resistance points to act precisely, meaning easy progress through the lower would be reason for us to confidently infer that the higher is apt to be reached. Either can be used to lay out shorts stopped as tightly as 6 to 8 cents. ________  UPDATE (Sep 24, 5:22 p.m. EDT):  The yellow flag is out, since DIA has begun to roll down from a record high that nonetheless failed to reach the Hidden Pivot target at 224.73 that I'd noted above. (click here to see chart). The weakness could be temporary, but we'll back away for the time being regardless. ______ UPDATE (Sep 25, 11:09 p.m.): Here's a trade that corresponds to one I've flagged in the cash Dow if you want to interpolate it  using options or DIA. You can adjust the midpoint pivot upward if 'C' migrates north overnight but has traded no higher than 223.20 or so. ________ UPDATE (Sep 26, 5:15 p.m.) Today's nutty, gratuitous spasms proved unworthy of our attention. By averting our eyes for a day, we can avoid letting it happen again on Wednesday. ________UPDATE (Sep 28, 12:16 a.m.):  The target at 224.73 given above now looks certain to be reached. Plan on shorting there any way you choose, but be aware that if DIA closes above 225.00, the 225.71

We hold a long-term position of 200 shares with a 120.36 cost basis. Last week's funk generated a bearish impulse leg on the daily chart, so it's time to reef the sails. Offer two Oct 6 128 calls short for 0.74, good through Tuesday. If TLT is trading above 127 .20, you should raise the offer on the calls by approximately one cent for each three-cent rise in the underlying. We'll need a little pop in the early going to fill this order, but check the chat room in any case, since I may change my guidance. This could include instructions to buy put options to give us more protection if T-Bonds should come down hard in the coming weeks. _______ UPDATE (Sep 19, 6:02 p.m. EDT): Rallies have been too feeble to provide any covered-write opportunities. Despite the likelihood of a bounce from an HP support a 125.58, I'll recommend that you short two Sep 29 126 calls on the opening at-the-market. _______ UPDATE (Sep 20, 5:17 p.m.): We shorted two calls on the opening for 0.80, the high of the day. Do nothing further for now. _______ UPDATE (Sep 25, 9:59 a.m.): Let's roll into Oct calls via a calendar spread, since the rally will give us an opportunity to get more protection than the 0.80 we received when we shorted the Sep 29 126 calls against our shares a while back. Specifically, I'll suggest selling the Oct 13/Sep 29 126 call calendar spread for a 0.40 credit, day order. The spread will narrow if TLT moves higher, but for now don't take less than 0.40. _______ UPDATE (Sep 25, 11:19 p.m.):  I've managed to trap myself after shorting near the low. For today, to offset our slightly negative-gamma exposure, bid 126.74 for 100 shares, day order. ________UPDATE

We began Friday looking for a tradeable top at the 2502.25 target shown. The futures rose no higher than 2500.00, so we went into the weekend with no position.  On Monday, assuming this vehicle hasn't traded above the target before the opening bell, you can offer a single contract short at 2502.25 with as tight a stop-loss as you can abide. (Officially, it will be at 2503.75.) The target is sufficiently clear and compelling that if it is easily exceeded, we would ordinarily infer that a bigger ABC pattern with a commensurately higher target is in play. However, the 2502.25 resistance is not exactly little stuff, since the pattern with which it is associated has been developing for fully three weeks. We will be obliged to use the pattern shown if 2502.25 gives way easily. It implies minimum upside thereupon to p2=2524.50, or to 2561.25 (!) if any higher. _______ UPDATE (Sep 18, 9:15 a.m. EDT):  With the opening 15 minutes away, the futures have been as high as 2504.50, so the trade is off. Expect them to head now toward the 2524.50 'secondary' pivot noted above, implying your bias should be bullish between here and there. It would take a fall Tuesday exceeding 2494.00 to hint of trouble. _______ UPDATE (Sep 19, 6:12 p.m. EDT): No change in the analysis given above. A Fed Open Market Committee announcement is due out Wednesday, so expect the markets to remain comatose until the momentous news comes at 2:00 p.m.  We already know what the Fed is going to say, and we already know the markets will go nuts for 10-20 minutes no matter what. Enough said.

I wrote here earlier that when the stock market finally tops, even those who saw it coming will not look like geniuses. Mr. Market always has a surprise up his sleeve, even for those with stellar track records calling lesser turns. For gurus, most vexatious of all has been predicting the dramatic and sustained upturn in volatility that presumably will accompany the onset of a bear market. Thus far, Mr. Market has made chimpanzees out of nearly all who would try to pick the day or even week of this event.  Since the bull market began in 2009, most of those betting on a surge in volatility have gotten crushed as VIX has fallen more or less relentlessly from a high of 90 to a record low in June of 8.84.  It is all but inevitable that one day an explosion in this index will wipe out the very substantial profits of those who have sold volatility the whole way down. What is underappreciated is that those who have taken the other side of the bet will be unable to recoup their losses when the explosion occurs. That's because the volatility spike will be so fleeting that volatility bulls will have not  minutes, but just seconds, to take their profits. The Permabear Dilemma Permabears who have been buying puts for years will face a somewhat different experience, one that will deny them an opportunity to cash out of their bet at maximum value. They are going to mistake the first stage of the bear for the big one, exiting puts at $10 that will be on their way to $200. It's not difficult to imagine how Mr. Market might put them in the proper frame of mind to do so. They are already halfway there, having been conditioned over the