Rick Ackerman

Subscribers appear to be diligently working the Sep 140-135 put spread I'd recommended, so I'll establish a tracking position of 32 of them for an 0.11 debit. That's in the middle of the 0.10-0.12 range where I'd said the spread would become an attractive buy. At that price, our theoretical risk will be about $350 -- but with a potential payoff of as much as $16,000. Since the trade thumbs its nose at a bull market that has been going strong for more than four years, we should have no illusions about a big score. In fact, to accept the probability that the trade will be a loser like perhaps 99% of all puts purchased since 2009, you should kiss the $350 good-bye at the outset, then forget about the position.  That said, I really like the 45-to-1 odds we'll be getting on this bet. ______ UPDATE (August 7): Someone asked in the forum about those 45-to-1 odds. Herewith, my response, since some of you who did the trade may not fully understand what it implies:  "DIA would need to fall below 135 by September 20, Cam. That’s equivalent to a 2000-point drop in the Dow — a longshot bet, as I’ve noted. In practice, however, we could easily triple or quadruple our money or better if the Dow were to drop just 400-500 points over the next 2-3 weeks."  _______ UPDATE (August 15, 1:24 p.m. EDT): Since things are starting to go our way, let me suggest offering half (16) of our spreads to close for 0.33. If this order fills we'll have a shot at an $8000 profit with no loss possible, even after commissions.

The stock market looks so unstoppable these days that I couldn't resist recommending a short in the E-Mini S&P to augment the one we've been working on using DIA put spreads.  Take a look at the chart accompanying today's E-Mini tout and see if you don't agree that we'll be getting excellent odds if the futures reach our target.

Chat room discussion suggests that some subscribers have been hard at work trying to short DIA by buying the Sep 140-135 put spread for 0.10-0.12.  A corresponding rally target in this vehicle looks shortable as well, although there will be special risks in attempting it on a Friday.  My suggestion is to initiate the trade with four contracts, using camouflage. Traders will probably need to zoom down to the 3-minute chart or less to find a perfect set-up, assuming one occurs. If the pullback that we expect from 1708.75 does indeed occur, be sure to cover at least two contracts before the bell. Although I doubt that Sunday evening's opening will impale shorts on a spike, it's a risk nonetheless, and we should therefore hold position size down to just one or two contracts.

[Today’s edition of Rick’s Picks continues with a new format that replaces the customary daily essay with a question concerning some important issue of the day that readers can discuss and debate until the conversation grows tired. RA] The Powers That Be would have us believe that the U.S. economy has been recovering for the last several years. In fact, for most Americans The Great Recession of 2007-09 never ended. The term “Great Recession” itself has come to be used mainly by pundits and news anchors who wish to imply that, more than three years after the recession officially ended, its effects are still very much with us. Growth has averaged less than 2% over that time – the feeblest recovery on record – and median household income has actually fallen by $2718, or 5%, in real terms. This is especially troubling, considering the colossal size of the monetary and fiscal stimulus attempted so far. So feeble have been the results that even economists -- as optimistic a bunch of useful idiots as the White House could have on its side -- are predicting that second-quarter growth will be even slower than the anemic 1.8% achieved in Q1. What say you, readers? Here are some questions to consider: Was the recovery never more than a bunch of statistical lies, doomed from the start? And even if not, can it possibly take hold if payrolls and wages remain stagnant? What if the real estate market suffers a relapse, or – heaven forbid –  the stock market collapses? Your thoughtful comments are welcome.

Gold's bounce came from exactly where it should have yesterday (see inset), as though its handlers have been using charts to determine where to do their dark magic.  Ordinarily we would infer that any correction exceeding a p midpoint support implies more weakness ahead. In this case, however, based on recent experience, we'll assume only that it portends more tedium. Strictly speaking, it would take a dive exceeding July 17's 1269.30 low to generate the kind of bearish impulse leg worth worrying about. Alternatively, we should want to see a pop to 1340.60 by week's end to signal the bull's resurgence.

On speculation that a broadening Chinese slowdown could devastate commodity prices, I've reproduced September Copper's weekly chart.  Price action precisely at and around the p midpoint (red line) implies not only that we are using the right pattern to produce an accurate and reliable target at 2.7780, but that the futures have crossed the point of no return on their way down to it. If the global recession is about to deepen, we should see 2.7780 give way within days of first being touched.  However, a strong bounce from very near that number would imply that the world's economy is not necessarily about to deep-six.

Two losing trades stopped us out for small change during this session, but that was a small price to pay for the lesson learned. What are the limits of system trading on a day so trendless that the Dow was barely able to move 10 points up or down for the entire six hours? You’ll find an interesting and enlightening answer to that question in this recording.

Mercifully, the stock market has been telegraphing each and every suffocatingly boring day in a month that has been filled with suffocatingly boring days.  Usually, one can tell within fifteen minutes of the opening bell whether we are about to experience yet another such day, since the ups and downs of the broad averages will tend to narrow after a moderate feint higher or lower on the opening bar. This tells us it's likely to be a good day to go fishing, or to do something else we might enjoy, since the markets are unlikely to prove worthy of our attention. While it's easy to infer that all this tedium is purposed toward consolidation and an eventual move higher, I am suggesting that we consider an alternative possibility -- i.e., that Mr Market is setting up a swoon or worse.  Accordingly, I am still recommending the purchase of DIA puts. For a more detailed instruction, check out the DJIA tout.

Unaccountable forces have given August Gold a nice boost late Tuesday night, and although we tend to shun rallies that may have caused too many others to salivate, this one holds tradable possibilities. Night owls in particular should check out the chart accompanying Wednesday's tout for gold futures, since it contains an explicit picture of a tradable set-up that could arise.